Tax Levies and Creditor Garnishments
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This webinar concentrates on processing garnishments in the payroll department other than child support. It covers the federal rules for creditor garnishments, the IRS rules for federal tax levies, the various aspects of state tax levies, the key points for processing state creditor garnishments, how to handle voluntary wage assignments such as payday loans and student loans. It includes best practices for reconciling and processing the garnishments in the payroll department. Sample memos for communicating with the employee concerning garnishments are included. Step by step math calculations are reviewed for tax levies and creditor garnishments. The IRS Form 668-W is reviewed. We will cover the latest news for Student Loans.
Tax levies and creditor garnishments can be some of the most complex tasks required of any payroll department. If garnishments are not handled correctly, you may find yourself facing situations that become extremely costly both financially and emotionally. Courts, federal and state regulations, bureaucracies, lawyers and a multitude of other factors can complicate even the most basic procedures. Add in the emotional turmoil that often accompanies garnishment orders and even small errors can become major disasters.
The reality is that all of the people and entities involved tax levies and other types of creditor garnishments expect action from the payroll department. Payroll must understand all the laws that apply towards processing these types of garnishments backwards and forwards. It is sometimes even up to the payroll department to catch and correct any errors that have been made by anyone else along the way! Precise and accurate compliance with garnishment regulation can help to reduce or eliminate the emotional and financial toll that can result from these unfortunate situations as well stave off any penalties that may result if processed incorrectly
Areas Covered in the Seminar:
• How to define the various types of tax levies and creditor garnishments
• The federal requirements a payroll department must know on each type of garnishment
• How state requirements affect garnishments
• How to handle terminated employees in regard to garnishments
• How to determine the withholding under a federal tax levy
• Deducting the proper amounts for student loans and creditor garnishments
• What rules are followed when it comes to state tax levies—and it may not be the CCPA
• Best practices for communicating with employees and issuing parties
• How to calculate the withholding and prioritize the order of distribution when an employee has more than one type of garnishment
• What to do with “payday loans” or what are known as voluntary wage assignments for creditors
• Best practices for processing garnishments in the payroll department
Who can Benefit:
• Payroll Executives/Managers/Administrators/Professionals/Practitioners/Entry Level Personnel
• Human Resources Executives/Managers/Administrators
• Accounting Personnel
• Business Owners/Executive Officers/Operations and Departmental Managers
• Lawmakers
• Attorneys/Legal Professionals
• Any individual or entity that must deal with the complexities and requirements of Payroll compliance issues
- Introduction
- Our Focus For Today 00:01:03
- The Forms And Calculations - Federal (IRS) Tax Levies 00:03:32
- Federal Tax Levies 00:03:39
- Form 668-W 00:04:26
- Form 668-W Cont’d 00:05:56
- Form 668-W - Sample Form 00:08:06
- Form 668-W - Sample Form Cont’d 00:08:20
- Form 668-W - Sample Form - Part 3 Cont’d 00:09:06
- Form 668-W - Sample Form - Must Complete Filing Status 00:09:31
- Answering Back 00:10:03
- Form 668-W - Sample Form 00:10:25
- What is Meant by Take Home Pay 00:11:36
- Determining Amount Exempt from Levy 00:12:51
- Exempt Table For Levies On Wages, Salary, and Other 00:13:16
- Paying the Levy 00:14:33
- Stopping the Levy 00:16:02
- Form 668-D Example 00:20:32
- Form 668-D Example - Release Of Levy 00:20:39
- Form 668-D Example - Release Of Property From Levy 00:20:51
- Voluntary Deduction Agreement 00:21:41
- Form 2159 Example 00:22:18
- Form 2159 Example - Terms of Agreement 00:22:24
- Form 2159 Example - Instructions To Employer 00:22:27
- Terminating Employees 00:23:31
- Form 668-W Example 00:24:56
- Federal Tax Levy Calculations 00:25:04
- Deductions for Charlie 00:26:16
- Deductions for Charlie Cont’d 00:26:32
- Tax Levy Would Calculate 00:26:49
- Rules And Regulations - Federal Agency Debt Collection 00:29:45
- Federal Agency Debt Collections 00:29:59
- Federal Agency Debt Collections - Disposable Pay And Deductions 00:31:05
- Federal Agency Debt Collections - Priorities 00:32:26
- Wage Garnishment Order Example 00:32:27
- CCPA Limits And Regulations - Creditor Garnishments 00:34:43
- Consumer Credit Protection Act 00:35:37
- Creditor Garnishments 00:37:29
- Maximum Garnishment Of Disposable Earnings Table 00:38:25
- Disposable Income 00:39:16
- Disposable Income Example 00:39:56
- Disposable Income and Net Pay 00:40:42
- Creditor Garnishment Limits by State 00:41:17
- States With Unique State Rules 00:41:53
- Creditor Garnishment Fees by State 00:45:44
- State Fees 00:47:06
- State Duration 00:50:01
- Creditor Garnishment Employer Response Time 00:52:35
- State Fees 00:53:43
- Creditor Garnishment Calculation 00:54:17
- Creditor Garnishment Calculation - Check The Chart 00:54:30
- Creditor Garnishment Calculation - Disposable Income 00:54:38
- Creditor Garnishment Calculation 00:55:04
- But What if There’s a Child Support Order? 00:55:14
- Let’s Do One Where He Has The Money 00:57:33
- Then Do the Garnishment Calculation 00:57:46
- Rules And Regulations - State Tax Levies 00:58:42
- State Tax Levies - CCPA Limits 00:59:00
- State Tax Levies - Disposable Income 00:59:35
- State Tax Levies Examples 01:00:38
- Rules And Regulations Also Known As Payday Loans - Voluntary Wage Assignment 01:01:57
- Voluntary Wage Assignment 01:02:05
- For Example - South Carolina 01:06:12
- For Example - Illinois 01:06:32
- For Example - Illinois Cont’d 01:06:47
- How To Handle The Payroll Department - Bankruptcies 01:06:57
- Bankruptcy 01:07:45
- Bankruptcy Cont’d 01:08:29
- Regulations And Priorities - Student Loans 01:10:40
- Department of Education Update 01:10:50
- Student Loans - Higher Education Act 01:12:03
- Student Loans - Federal Regulations 01:12:27
- Disposable Pay Is Defined As… 01:12:43
- But They Do Not Include… 01:13:02
- Wage Garnishment Worksheet Example 01:13:11
- Handling A Student Loan Garnishment 01:13:31
- Wage Garnishment Order Example 01:14:14
- Wage Garnishment Order Example Cont’d 01:14:19
- Employee Certification Form Example 01:14:22
- Employee Certification Form Example Cont’d 01:14:26
- But What if the Employee is Gone? 01:14:38
- Employee Certification Form 01:14:48
- Then Each Quarter… 01:14:53
- Handling In The Payroll Office - Basics Of Garnishments 01:15:27
- Types of Deductions 01:15:35
- Garnishment 101 01:16:30
- Definition of Garnishment 01:17:05
- Usual Suspects 01:17:22
- Exceptions On Priority 01:18:08
- Consumer Credit Protection Act 01:20:14
- A Garnishment is Received in Payroll 01:20:35
- Is It Your Employee? 01:21:30
- Is It Legal? 01:21:52
- What Laws Do I Follow? 01:23:13
- Answer Back 01:23:45
- Go Tell It To The Employee 01:24:00
- Payroll Form 01:24:16
- Sample Letter Creditor Garnishment 01:24:40
- Sample Letter Creditor Garnishment Cont’d 01:24:45
- Set It Up In Payroll 01:25:49
- Setting It Up 01:26:39
- Tracking System 01:27:12
- Paying It Out 01:27:36
- Reconciling 01:28:19
- Terminating Employees 01:29:34
- Security - Confidentiality 01:30:34
- Security - Payroll Personnel 01:33:44
- Security for Payroll Personnel 01:32:06
- Final Questions 01:36:59
- Presentation Closing 01:42:03
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Vicki M. Lambert, CPP
Vicki M. Lambert, CPP, is President and Academic Director of The Payroll Advisor™, a firm specializing in payroll education and training. The company offers a payroll news service which keeps payroll professionals up-to-date on the latest rules and regulations.With over 35 years of hands-on experi [...]
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Aurora Training Advantage is an approved provider through the American Payroll Association. To receive credit through the American Payroll Association for this program you MUST attend the program in its entirety.
- 401(k) 00:12:27, 01:15:51
- Bankruptcy 01:07:38, 01:17:34
- Child Support 00:32:36, 00:37:03, 00:55:21, 01:02:16, 01:08:35, 01:17:27, 01:19:59
- Consumer Credit Protection Act - CCPA 00:29:59, 00:35:41, 00:59:08, 01:03:41, 01:20:14
- Dependant 00:13:08, 00:26:42
- Disposable Income 00:39:18, 00:54:25
- Disposable Pay 00:31:18, 00:37:17
- Exempt 00:12:57, 00:38:41, 00:45:10
- Federal Bankruptcy Act 01:07:49
- Form 2159 00:21:41
- Form 668-D 00:16:35
- Form 668-W 00:03:40, 00:06:27, 00:10:04
- Form W-4 00:07:21
- Fringe Benefits 00:12:20
- Garnishment 00:00:07, 01:01:22, 00:02:04, 00:02:59, 00:04:09, 00:16:45, 00:18:37, 00:35:07, 00:40:37, 00:48:16, 00:55:27, 01:03:29, 01:13:13, 01:17:12, 01:26:10, 01:29:37
- Higher Education Act 01:12:06
- Involuntary Deduction 00:11:56
- Levy 00:00:07, 00:01:22, 00:09:15, 00:10:40, 00:12:12, 00:15:11, 00:26:49, 00:34:49, 00:58:44, 01:14:37, 01:18:13
- Minimum Wage 00:32:21, 00:38:31, 00:45:08
- Net Pay 00:40:45
- Publication 1494 00:03:55, 00:12:54, 00:22:11
- Sovereign Citizen 00:28:15, 01:30:36
- Take-Home Pay 00:04:23, 01:31:39
- Vendor 00:30:59
- Voluntary Deduction 00:11:56, 00:21:44
- Voluntary Wage Assignment 00:02:42, 01:02:05
- Wage 00:03:24, 00:20:46, 00:30:20, 00:45:04, 01:00:57, 01:12:35
401(k): In the United States, a 401(k) plan is the tax-qualified, defined-contribution pension account defined in subsection 401(k) of the Internal Revenue Code.
Bankruptcy: is a legal proceeding in which a debtor declares their inability to pay back their creditors.
Child Support: Child support is an ongoing, periodic payment made by a parent for the financial benefit of a child following the end of a marriage or other similar relationship.
Consumer Credit Protection Act (CCPA): The Consumer Credit Protection Act (CCPA) is a piece of federal legislation that puts in place consumer protections against lenders. Passed in 1968, the law requires lenders to explain the actual cost of borrowing money in terms the consumer understands.
Dependent: A dependent is a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependency exemption. Each dependency exemption decreases income subject to tax by the exemption amount. Your dependent must be a U.S. citizen, a national, a resident alien of the U.S., or a resident of Canada or Mexico. A dependent can be claimed by one and only one taxpayer in any given year.
Disposable Pay: “Disposable pay” is the pay remaining after deduction of any amounts required by law to be withheld. The maximum for student loan and all other garnishments is 25% of disposable income.
Disposable income: Disposable income is the portion of an employee's paycheck that is subject to garnishments. This portion is what remains after the following amounts are deducted from their gross earnings for a given pay period. Voluntary deductions, such as 401(k) contributions, are considered part of disposable income.
Exempt : Exempt employee is a term that refers to a category of employees set out in the Fair Labor Standards Act. They do not receive overtime pay, nor do they qualify for the minimum wage
Federal Bankruptcy Act: The act provided for creditors to file bankruptcy against those who could not pay their debts. Once filed, bankruptcy cases were sent to district judges who would pick specific administrators separate from themselves to look over the cases and help facilitate the payments and legal ramifications.
Form 2159: Used for a voluntary payroll deduction agreement for taxes owed. There are three parts to Form 2159: the Acknowledgement Copy (to be returned to the IRS), the Employer’s Copy, and the Taxpayer’s Copy.
Form 668-D: When all the tax shown on the levy is paid in full, the IRS will issue a Form 668-D, Release of Levy/Release of Property from Levy.
Form 668-W: The IRS uses Form 668-W(c) to notify your employer and you of a levy against your wages. If you have unfiled returns, the IRS will not release the levy. Your employer is required to turn over non-exempt wages and you should inform them of any dependents you have.
Form W-4: Form W-4 (otherwise known as the "Employee's Withholding Allowance Certificate") is an Internal Revenue Service (IRS) tax form completed by an employee in the United States to indicate his or her tax situation (exemptions, status, etc.) to the employer.
Fringe Benefits: An extra benefit supplementing an employee's salary, for example, a company car, subsidized meals, health insurance, etc.
Garnishment: A legal summons or warning concerning the attachment of property to satisfy a debt
Higher Education Act: The Higher Education Act (HEA) is a federal law that governs the administration of federal higher education programs. Its purpose is to strengthen the educational resources of our colleges and universities and to provide financial assistance for students in postsecondary and higher education.
Involuntary Deduction: Involuntary deductions are those of which neither the employer nor the employee has control. The employer is required by law to deduct a certain amount of the employee's pay and send (remit) it to a person or government agency to satisfy the employee's debt.
Levy: A tax levy, under United States Federal law, is an administrative action by the Internal Revenue Service under statutory authority, generally without going to court, to seize property to satisfy a tax liability. The levy "includes the power of distraint and seizure by any means".
Minimum Wage: The lowest wage paid or permitted to be paid specifically fixed by a legal authority or by contract as the least that may be paid either to employed persons generally or to a particular category of employed persons.
Net Pay: Net pay means take-home pay or the amount employees earn after all payroll deductions are subtracted from their gross pay.
Publication 1494: The IRS mails Publication 1494 (PDF) with the levy which explains to your employer how to determine the amount exempt from levy.
Sovereign Citizen: Sovereign citizens believe that courts have no jurisdiction over people and that the use of certain procedures (such as writing specific phrases on bills they do not want to pay) and loopholes can make one immune to government laws and regulations.
Take-Home Pay: The pay received by an employee after the deduction of taxes and other obligations.
Vendor: A vendor is a person or business that supplies goods or services to a company. Another term for the vendor is the supplier. In many situations, a company presents the vendor with a purchase order stating the goods or services needed, the price, delivery date, and other terms.
Voluntary Deduction: Voluntary deductions are amounts that an employee has elected to have subtracted from gross pay. Examples are group life insurance, healthcare and/or other benefit deductions, Credit Union deductions, etc. Post-tax deductions are withheld after all taxes have been calculated and withheld. Participation in these programs may require that the individual complete a written salary reduction agreement authorizing payroll deductions.
Voluntary Wage Assignment: A wage assignment is a voluntary agreement between the employee and the creditor where an amount is withheld from the employee's paycheck to satisfy a debt owed to a third-party recipient. In a voluntary wage assignment, a worker asks their employer to withhold a portion of their paycheck and send it to a creditor to pay off a debt.
Wage: A fixed regular payment, typically paid on a daily or weekly basis, made by an employer to an employee, especially to a manual or unskilled worker.
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