Sec 9: Other Deductions From Pay Flashcards
Involuntary Deductions
Deductions are those over which an employer or employee has no control. ER is required by law to deduct a certain amount of the EE’s pay and send it to a person or agency
Tax Levies
Employees who fail to timely pay their taxes may become subject to a federal or state tax “levy” after other collection efforts have been exhausted. ER is faced with:
* The amount of the employee’s wages that is subject to the levy; and
* Whether there are other claims on the employee’s wages that take priority over the levy.
Federal Tax Levies
ER receives Form 668-W Notice of Levy on Wages, Salary, and Other Income (6 parts).
Priority vs. other attachment orders
Tax levies must be satisfied before all other garnishment or attachment orders, except for child support withholding orders
Figuring out the amount to deduct and remit
All amounts paid to the employee are subject to levy except:
* Unemployment compensation benefits
* Workers’ compensation benefits
* Annuity and pension payments under the Railroad Retirement Tax Act and to certain armed services personnel
* Certain armed service-connected disability payments
* Certain public assistance payments (welfare and supplemental social security benefits)
* Amounts ordered withheld under a previously issued court order for child support
Exempt amount subtracted from “take‑ home” pay
The amount of an employee’s wages that is ultimately subject to the federal tax levy is the amount remaining after the exempt amount has been subtracted from the employee’s “take-home pay.”
When and where to make payments of withheld amounts
Form668- W instructs employers to remit amounts withheld for levy on the same day wages are paid to the employee. Should be sent to the IRS at the address shown on the front of Part 1
When to stop
According to Form668- W, the employer must continue to withhold and make levy payments until it receives Form668- D, Release of Levy/Release of Property from Levy. 668 - D will contain the final amount due
What is the penalty for failing to withhold?
Employers that fail to withhold and pay over an amount not exempt from levy after receiving Form668‑ W are liable for the full amount required to be withheld, plus interest from the wage payment date. In addition, the employer is liable for a penalty equal to 50% of the amount recoverable by the IRS after the failure to withhold and remit.
CCPA
Consumer Credit Protection Act. It provides the legal framework around which state child support withholding laws have been constructed and limits the amount that can be withheld for
child support.
CS - What law governs the maximum amount that can be withheld from an employee’s wages for spousal or child support?
Consumer Credit Protection Act
What is the max that can be withheld?
50% of disposable earnings if EE is supporting another spouse/child
60% if the EE is not
Amounts increase to 55% and 65% if the EE is at least 12 weeks late (arrears)
Calculation disposable earnings
Determined by subtracting all deductions required by law (taxes) from an EE’s gross earnings. Vol deductions, such as health and life insurance, union dues, and retirement plan contributions, are not subtracted from earnings to calculate disposable earnings.
Complying with more than one withholding order
state law governs how they must be handled. If the orders are from different states, the law in the state where the employee works (principal place of employment) applies
Creditor Garnishments
The employer can be required to withhold a portion of the employee’s wages for a wage garnishment only if the creditor first brings a court proceeding where proof of the debt is offered and the employee has a chance to respond. Wage attachment or income execution
Creditor limit to be garnished
- 25% of the employee’s disposable earnings for the week; or
- The amount by which the employee’s disposable earnings for the week exceed 30 times the federal minimum hourly wage then in effect.
Bankruptcy Orders
Bankruptcy orders issued under Chapter XIII of the Bankruptcy Act take priority over any other claim against the employee’s wages, including federal and state tax levies received before the bankruptcy order, other than child support withholding orders
Student Loans
No more than the lesser of 15% of an employee’s disposable
earnings (defined as earnings minus amounts required to be deducted by law and to pay for health insurance) or the excess of the employee’s disposable earnings over 30 times the federal hourly minimum wage then in effect may be garnished to satisfy a delinquent student loan unless the employee consents in writing to a higher percentage. 12 months before they get a new one
