What Can Be Garnished From a Payroll Check?
A creditor or legal agency, such as the IRS or the state, can garnish a debtor's payroll check to fulfill a debt she owes. The process in which the issuing institution sends the employer notification to withhold a certain portion of the employee's pay to satisfy this debt is called a wage garnishment. Under Title III of the Consumer Credit Protection Act, the employer can garnish only so much of the employee's paycheck.
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Process
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A creditor cannot garnish wages unless it goes to court and obtains a judgment to do so. Once judgment is granted, the issuing agency sends the employer and the employee a copy of the garnishment notice. Federal and state agencies, such as the IRS and state taxation agency, can garnish without a court order but must send the debtor a bill for payment due and a notice of intent to garnish before enforcing the garnishment. These agencies often use the term "levy" when referring to a garnishment.
Employer Role
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A wage garnishment is a statutory deduction, meaning that it is a legal requirement; therefore, the employer is required to adhere to its conditions. The garnishment states the flat amount or percentage to deduct from the employee's paycheck. The employer is usually required to start the garnishment by the employee's next payroll check. The employer should contact the issuing agency if uncertain about any aspect of the garnishment notice.
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Disposable Income
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Wage garnishments are withheld from disposable income. The employee's gross income is his pay before any deductions are made. Disposable income is pay after payroll taxes, such as federal income tax, Social Security tax, Medicare tax and pretax voluntary benefits, such as a cafeteria plan, are deducted. I
Garnishment Limits
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Under Title III, the employer can withhold the lesser of the total by which the disposable income exceeds 30 times the federal minimum wage ($7.25 per hour, as of July 24, 2009) or 25 percent of disposable income. The employer can enforce more than one garnishment simultaneously, provided the total is not above 25 percent of disposable pay. The employer can withhold up to 50 percent for child support or alimony if the employee is taking care of a spouse or child who is not included in the support order. If not, the employer can withhold up to 60 percent. An additional 5 percent is allowed for support payments more than 12 weeks late. For an IRS wage garnishment, the employer uses IRS Publication 1494 to determine the amount exempt from garnishment. Some states also have restrictions on garnishment amounts.
Considerations
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Failure to adhere to Title III can result in the employer facing a fine of up to $1,000 or imprisonment for up to a year, or both. Employees who do not agree with a wage garnishment should file an appeal with the issuing agency within the time frame stated on the garnishment notice.
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References
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