What Can and Cannot be Deducted from an Employee's Wages

1. Introduction
2. Our Focus Today 00:01:06
3. Types of Deductions 00:04:15
4. Taxes 00:05:05
5. Federal Income Tax 00:05:11
6. FICA Taxes 00:10:58
7. OASDI 00:11:24
8. Medicare 00:13:48
9. Additional Medicare Tax 00:14:44
10. Nonresident Aliens 00:15:13
11. State Income Tax 00:18:05
12. Employees' Choices for State Income Tax 00:20:25
13. For Example 00:21:22
14. States with Local Tax Requirements 00:22:51
15. Caution: Local Taxes Ahead 00:26:06
16. Garnishments 00:25:56
17. Garnishments and the CCPA 00:27:24
18. Limits on Child Support 00:28:10
19. Disposable Earnings 00:29:08
20. Disposable Earnings - Mandatory Deductions 00:29:25
21. Worksheet 00:29:46
22. Allowable Disposable Income 00:30:32
23. Example of Allowable Disposable Income 00:31:19
24. So the Math Would Be 00:31:43
25. Federal Tax Levies 00:33:07
26. Federal Tax Levies - Worksheet 00:33:38
27. What Is Meant By Take Home Pay 00:34:34
28. Worksheet 00:35:06
29. Federal Tax Levy Calculations 00:35:30
30. Deductions for Charlie 00:35:50
31. Filing Status Worksheet 00:36:03
32. Tax Levy Would Calculate 00:36:41
33. State Tax Levies 00:37:35
34. State Tax Levies Cont’d 00:37:36
35. Creditor Garnishments 00:38:07
36. Creditor Garnishment Calculation 00:38:49
37. Creditor Garnishment Calculation (Cont’d) 00:39:01
38. Creditor Garnishment Calculation (Cont’d) 00:39:25
39. Creditor Garnishment Calculation (Cont’d) 00:39:54
40. But What If There’s a Child Support Order? 00:39:59
41. Let’s Do One Where He Has the Money 00:41:29
42. Then Do The Garnishment Calculation - Disposable Income 00:42:03
43. Then Do the Garnishment Calculation - Garnishment 00:4
44. Creditor Garnishment Limits By State 00:42:21
45. States with Unique Rules 00:43:01
46. What If There Is More Than One? 00:44:34
47. For Example - Alaska 00:46:09
48. Voluntary Wage Assignment 00:46:56
49. Fringe Benefits - Health Insurance and Group Term Life Insurance 00:50:07
50. Deducting for Fringe Benefits 00:50:08
51. Uniforms 00:51:43
52. Deducting for Uniforms 00:51:54:
53. Deductions for Uniforms By State 00:53:44
54. Deducting for Uniforms - States 00:54:09
55. Meals and Lodging 00:57:14
56. Meals and Lodging -  Federal  00:57:
57. Lodging: Value Can Be Excluded If: 00:58:06
58. Business Premises 00:58:25
59. For Employers Convenience 00:58:30
60. Condition Of Employment 00:58:38
61. Example 00:59:00
62. Executive Housing 00:59:40
63. De Minimus Meals 01:01:17
64. Examples of DeMinimus Meals 01:02:33
65. Meals on Premises 01:02:53
66. Meals on Premises Cont’d 01:03:12
67. Meals And Lodging Credits Against Minimum Wage 01:04:26
68. Requirements 01:05:05
69. Shortages/Breakage 01:05:35
70. Deducting For Breakage Or Shortages 01:05:46
71. Are Deductions Permitted For Breakages? 01:07:00
72. Are Deductions Permitted For Shortages? 01:07:40
73. Overpayments 01:08:36
74. Overpayments: FLSA Requirements 01:08:45
75. FLSA Requirements 01:09:18
76. FLSA 01:09:58
77. Facts Of The Case 01:10:10
78. FLSA 01:10:36
79. FLSA Field Operations Handbook (FOH) 01:11:01
80. Exempt Employees 01:18:19
81. Overpayments: The States 01:12:52
82. Advanced Vacation Pay 01:14:52
83. Deducting For Advanced Vacation 01:16:05
84. Vacation Pay in FOH 01:17:14
85. New York 01:17:36
86. Vacation--CA 01:17:57
87. Loans and Employee Purchases 01:18:40
88. Loans to Employees 01:19:09
89. California 01:21:43
90. Employee Purchases 01:23:57
91. Anti-Wage Theft Laws 01:29:57
92. Anti-Wage Theft Laws 01:30:08
93. Are There Any Questions? 01:37:36
94. Presentation Closing 01:51:16

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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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• Allowable Disposable Income 00:30:34
• Child Support 00:01:59, 00:27:05, 00:30:45, 00:37:46, 00:39:59, 00:45:05
• Consumer Credit Protection Act - CCPA 00:27:24, 00:32:41, 00:47:39
• De Minimus 01:02:33
• Department of Labor (DOL) 01:08:45
• Disposable Income 00:29:09, 00:37:42, 00:41:58
• Disposable Pay 00:30:58
• Exempt 00:08:33, 00:10:12, 00:14:25, 00:20:13, 00:36:38, 01:11:25
• Fair Labor Standards Act (FLSA) 00:51:57,  01:08:46
• Federal Insurance Contributions Act (FICA) 00:11:00, 00:14:35, 00:15:30
• Field Operations Handbook 01:11:04, 01:17:1
• Form 668-W 00:33:14
• Form W-2 00:13:03
• Form W-220 00:22:07
• Form W-4 00:06:09, 00:08:40, 00:14:32, 00:18:15, 00:20:22, 00:24:52
• Fringe Benefits 00:02:15, 00:50:10
• Garnishments 00:01:56, 00 04:58, 00:27:01, 00:32:36, 00:37:49, 00:40:22, 00:50:49, 01:15:30
• Internal Revenue Code (IRC) 00:06:00
• Involuntary Deduction 00:04:51
• Levy 00:02:00, 00:27:04, 00:33:10, , 00:36:38, 00:47:08
• Minimum Wage 00:39:33, 00:52:22, 00:54:19, 01:04:32, 01:05:55, 01:17:32
• Nonresident Alien (NRA) 00:10:43, 00:13:36, 00:15:18
• OASDI 00:11:13
• Overtime 01:09:47, 01:17:33
• Payment Act of 1943 00:05:11
• Publication 1494 00:33:29, 00:36:06
• Reciprocal Agreements 00:20:36, 00:21:26
• Resident Alien 00:13:32
• Take-Home Pay 00:34:48
• Voluntary Deduction 00:04:36
• Voluntary Wage Assignment 00:02:04, 00:27:09, 00:47:00
• Wage 00:03:47, 00:06:24, 00:12:27, 00:14:56, 00:57:23, 01:01:14, 01:17:26
• Wage Base 00:11:36, 00:14:00

Allowable Disposable Income: Allowable disposable income is the most you can garnish someone's wages, dependent on their disposable income and the CCPA percentage limit.

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.

De Minimis: Too trivial or minor to merit consideration.

Department of Labor (DOL): The United States Department of Labor is a cabinet-level department of the U.S. federal government responsible for occupational safety, wage and hour standards, unemployment insurance benefits, reemployment services, and some economic statistics; many U.S. states also have such departments.

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

Fair Labor Standards Act (FLSA): The Fair Labor Standards Act of 1938 29 U.S.C. § 203 is a United States labor law that creates the right to a minimum wage, and "time-and-a-half" overtime pay when people work over forty hours a week. It also prohibits most employment of minors in "oppressive child labor".

Fair Market Value (FMV): The term fair market value is used throughout the Internal Revenue Code among other federal statutory laws in the USA including Bankruptcy, many state laws, and several regulatory bodies. In litigation in many jurisdictions in the United States, the fair market value is determined at a hearing.

Federal Insurance Contributions Act (FICA): The Federal Insurance Contributions Act is a United States federal payroll contribution directed towards both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, people with disabilities, and children of deceased workers.

Field Operations Handbook: The Field Operations Handbook (FOH) is an operations manual that provides Wage and Hour Division (WHD) investigators and staff with interpretations of statutory provisions, procedures for conducting investigations, and general administrative guidance. The FOH was developed by the WHD under the general authority to administer laws that the agency is charged with enforcing. The FOH reflects policies established through changes in legislation, regulations, significant court decisions, and the decisions and opinions of the WHD Administrator. It is not used as a device for establishing interpretative policy.

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-2: Form W-2 is an Internal Revenue Service tax form used in the United States to report wages paid to employees and the taxes withheld from them. Employers must complete a Form W-2 for each employee to whom they pay a salary, wage, or other compensation as part of the employment relationship. - Wikipedia (https://en.wikipedia.org/)

Form W-220: NONRESIDENT EMPLOYEE’S WITHHOLDING RECIPROCITY DECLARATION - THIS DECLARATION MAY ONLY BE USED BY A NONRESIDENT WORKING IN WISCONSIN WHO IS A LEGAL RESIDENT OF ILLINOIS, INDIANA, KENTUCKY, OR MICHIGAN.

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

Internal Revenue Code (IRC): The Internal Revenue Code, formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 of the United States Code.

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.

Nonresident Alien (NRA): This income is taxed at a flat 30% rate, unless a tax treaty specifies a lower rate. Nonresident aliens must file and pay any tax due using Form 1040NR, U.S. Nonresident Alien Income Tax Return or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents.

OASDI: OASDI stands for old age, survivors, and disability insurance tax, and the money that your employer collects goes to the federal government in order to fund the Social Security program.

Overtime: Overtime is time and a half of what an employee earns for every hour worked over 40 in a workweek. The FLSA salary threshold is the minimum salary employers must pay employees for them to be exempt from overtime wages.

Payment Act of 1943: The Current Tax Payment Act of 1943, Pub. L. 68, Ch. 120, 57 Stat. 126 (June 9, 1943), re-introduced the requirement to withhold income tax in the United States. A pay-as-you-go plan for taxpayers whereby employers would retain a percentage of taxes from every paycheck and forward it directly to Washington's war chest. Withholding, as we know it today, was born.

Publication 1494: The IRS mails Publication 1494 (PDF) with the levy which explains to your employer how to determine the amount exempt from levy.

Reciprocal Agreements: A reciprocal agreement, also called reciprocity, is an agreement between two states that allows residents of one state to request exemption from tax withholding in the other (reciprocal) state. This can save you the trouble of having to file multiple state returns.

Resident Alien : A resident alien is a foreign person who is a permanent resident of the country in which he or she resides but does not have citizenship. To fall under this classification in the United States, a person needs to either have a current green card or have had one in the previous calendar year.

Take-Home Pay: The pay received by an employee after the deduction of taxes and other obligations.

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.

Wage Base: The taxable wage base is the amount of an employee's income from which the IRS calculates an individual's tax liability for Social Security. In other words, the taxable wage base is the income an employee earns on which Social Security taxes must be paid.