If you receive a court-ordered wage garnishment order or tax levy for an active employee, you're legally obligated to withhold the employee's wages. These orders have specific guidelines that determine the amount you withhold and the way you handle multiple garnishments.
What's a garnishment?
A garnishment is an order by a court, the federal government, or a state agency for an employer to withhold wages from an employee's pay and send the money to an agency or creditor. The order might also let you add an administrative fee to the employee.
- Federal and state tax levies
- Child or spousal support withholding orders
- Federal and state student loans
- Federal agency debt orders (non-tax)
- Creditor garnishments
Other names used to refer to a garnishment order include "earnings withholding order," "federal tax levy," "support order," "bankruptcy order," "writ of garnishment," or "garnishment summons."
When you receive a garnishment order
If you receive a garnishment order or levy for an employee, make sure you set it up correctly in Intuit Online Payroll so that the withholdings are calculated as stated in the order.
Review the order
The order will provide the following information:
- When to begin withholding wages (the effective date)
- An identifying code or case identifier
- Where and how often to send the garnished wages
- How much notice you have to give the employee
- How to prioritize the order in relation to any other garnishment orders that the employee may have
Depending on the type of order (Federal Tax Levy, child spousal support order, or other type of order), make a note of the following information, which you'll enter when you set up the order in Intuit Online Payroll:
- Federal tax levy: Make a note of the amount that's exempt from the garnishment (the order contains a table that's based on the employee's W-4 withholding allowances).
- Child/spousal support order: Make a note of the total amount to garnish per pay period and the maximum percent of the employee's disposable income (income that's available after you take out taxes and exempt deductions) that can be garnished.
- Other type of garnishment: Make a note of the total amount owed, the amount to be garnished per pay period, and the alternate garnishment cap (the maximum amount that can be withheld from a paycheck or pay period).
Set up the garnishment
When you set up a garnishment, we calculate the garnishment amount based on the type of garnishment and the employee's disposable income after you take out taxes and exempt deductions.
We determine disposable income based on:
- The type of garnishment
- The employee's allowances for state and federal taxes and the filing status. The employee's allowances often match their W-4 allowances
- The employee's existing deductions, such as medical insurance
- Any information you enter about adjustments to exempt deductions or allowances
For details about setting up a garnishment order, see Setting up a garnishment.
Send garnished wages to the agency or creditor
- Go to the Report Tab, then under Employee Reports, click Deductions and Contributions.
When you set up the garnishment, make sure to include the agency name as well as the employee's name in the description to help remind you who to send the garnished wages to.