What you need to know for payroll purposes
As you expand your business and take on new employees, you may come across a situation where you are required to garnish wages. Wage garnishment occurs when an employer is required to withhold the earnings of an individual for the payment of a debt in accordance with a court order or other legal procedure.
Title III of the Consumer Credit Protection Act (CCPA) permits a greater amount of an employee’s wages to be garnished for child support, bankruptcy or federal or state tax payments. Title III allows up to 50 percent of an employee’s disposable earnings to be garnished for child support if the employee is supporting a current spouse or a child who is not the subject of the support order, and up to 60 percent if the employee is not doing so. An additional five percent may be garnished for support payments over 12 weeks in arrears.
An employee’s disposable earnings is defined as the amount of earnings left after legally required deductions and expenses—federal, state and local taxes, social security, unemployment insurance and state employee retirement systems contributions—have
been made. Deductions and expenses not required by law, such as union dues, health and life insurance and charitable contributions, are not subtracted from gross earnings when the amount of disposable earnings for garnishment purposes is calculated.
The IRS offers special payroll tax tables to help determine how much tax should be withheld.†
Of course, if you’re a small business owner who receives a request to garnish wages and would like some advice our counsel in this matter, please don’t hesitate to contact us and we’d be happy to help both you and your employee through this sometimes difficult situation.