Setting up creditor garnishments

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To set up an employee with a creditor garnishment and have the application make the appropriate calculations during payroll check entry, follow these steps.

See also: Garnishment overview

Creating creditor garnishment payroll items

The first step is to create a payroll item for the client to use for employees with creditor garnishments.

  1. Add a new deduction item for the client.

    Note: We recommend that you do not enter an agent in this section. You will select the appropriate agents when you add creditor garnishment order information for the employee.

  2. In the Special Type section of the Main tab of the Payroll Items screen, choose the Garnishment option and select Creditor garnishment from the drop-down list.

    Special type Creditor garnishment
  3. Click Enter to save your changes

Adding the new deduction item to the employee record

  1. In the Setup > Employees > Payroll Items tab, make the new garnishment deduction item active for the employee by marking its checkbox in the Deductions grid.
  2. Click the Ellipsis button button for the new deduction item.
  3. Enter or select the appropriate information in the Creditor Garnishment Orders section of the Main tab of the Employee Payroll Item Settings dialog.

    Creditor garnishment grid
    • Case Identifier. (Required) Enter the case identification number. 
    • Order date. You can enter the date on which the order was issued.  This field is not mandatory, but it is used to determine the priority of multiple garnishments when needed.
    • Order State. Select the state in which the order was issued.
    • Agent. You can use this field to assign a payroll agent to the creditor garnishment order to use for generating liabilities. The vendors listed in the Agent drop-down list are vendors that are set up with the Payroll Agent vendor type in the Setup > Vendors screen.
    • Percent or Amount. Specify the percent or the amount that is to be deducted per paycheck.
    • Total Order amount. You can use this field to specify a perpetual limit for the case. If you leave this field at its default $0.00 amount, the application will assume that the garnishment has no limit.
  4. Save the employee payroll item information.

Limits

Limits are restricted by the Consumer Credit Protection Act (CCPA). 

Accounting CS withholds a creditor garnishment amount that is the lesser of:

Notes

  • These limits do not apply to garnishments for bankruptcy, child support, or federal or state tax levies.
  • An employee will not be subject to the garnishment if their weekly disposable income amount is less than 30 x the federal minimum wage during that pay period.

Example of creditor garnishment limit calculations

Factors in this calculation:

Garnishment percentage 25% of disposable income
Employee’s gross pay amount $550.00
Taxes withheld $105.38
Employee’s net pay (disposable income) $444.62
Employee’s pay frequency Bi-weekly (doubles the 30x to 60x)
Federal minimum wage $7.25

The calculation for a garnishment will change based on the pay frequency for the employee. In this example, our employee is paid on a bi-weekly frequency, so our calculation is changed to the lesser of 25% of the employee’s disposable income or 60 times the federal minimum wage.

 $550.00 – $105.28 = $444.62 (The employee’s disposable income for this pay period)

60 x $7.25 (minimum wage) = $435.00 (number of pay periods x federal minimum wage)

 Accounting CS withholds the lesser of the following:

  • 25 x $444.62 = $111.15 (25% of the employee’s disposable income for this pay period)
  • $444.62 – $435.00 = $9.62 (disposable income minus the minimum wage calculation)

Because the second calculation is the lesser of the two amounts, Accounting CS withholds $9.62 for the payroll period.

State-specific exceptions to garnishment limits

Most states use the limits described at the beginning of this section, but there are some exceptions.

Related articles

Garnishment overview

Setting up vendors

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