Marlene Mitten Garnishment Manager Hewitt Associates

Marlene Mitten 

Garnishment Manager 

Hewitt Associates

A little about me….. 

Over 20 years of payroll experience 

• 6 years managing a garnishment 

department 

• CPP - 2001 

• Mother of 2 teen-age daughters ☺

Two Types of Garnishments 

Involuntary – EE & ER –No control 

(Child Support, Tax Levy, etc.) 

Voluntary - EE Voluntarily Agrees 

(Wage Assignment, IRS Voluntary 

Agreement, etc.)

Involuntary Deductions 

Statutory Deductions also known as “Involuntary 

Deductions” are deductions which an employer or 

employee has no control because they are required by law. 

Seven types: 

• Tax levies 

• Child Support Withholding Orders 

• Creditor Garnishments 

• Bankruptcy orders 

• Student Loan Collections 

• Federal Agency Debt Collections 

• Federal Wage-Hour Law Restrictions on Deductions


Mandated by federal and state laws 

Neither the employer or employee has 

control 

If not Withheld - Penalties could equal the 

amount of debt plus fines and interest

Employer Responsibilities 

• Comply With the Order 

Withhold Required Amounts 

Complete required interrogatory/answer 

Remit Amounts to Agency 

Notify the Employee and provide required 

documentation (ie: 668W p. 2-5) 

Notify agency if employee terminates 

employment

Recordkeeping & Tracking 

Log garnishments by date received, 

employee name and type 

Prepare a worksheet with all pertinent 

information 

Keep a copy of garnishment on file 

Record when deductions are taken and 

payments are remitted

Tax Levies 

Levy can be for unpaid federal or state taxes 

Tax levy withholding rules vary by state 

Some state tax levies can withhold 100% of 

disposable earnings

Federal tax levy 

Tax Levies 

• Form 668-W Notice of Levy on Wages, Salary, and other 

Income - contains 6 parts 

• Part 1 – employer’s copy – shows amount of levy 

• Part 2 thru 5 – give to employee 

• Part 2 – employee keeps 

• Parts 3 thru 5 – employee needs to complete and 

return Parts 3 & 4 of the Form 668-W to employer 

within 3 days of the date the employer receives the 

form 

• Part 6 – kept by IRS

Tax levies 

• If employee does not return Parts 3 & 4 of Form 668-W, 

exempt amt is calculated based on married filing 

separately with one exemption 

• Employee is entitled to exempt amount – based on year 

levy is received – even when levy will span more than 

one tax year unless employee completes new Parts 3 & 4 

• Exempt amount (Publication 1494) is based on the 

standard deduction amount that you claim when you file 

your taxes 

• Direct Deposit is NOT a “pre levy” deduction

Tax levies 

Only deductions in effect at time of receipt of levy 

are valid – any new elected deductions are not to be 

considered as part of take home pay (subject to IRS 

exemptions) 

Employee with two jobs – unless IRS notifies 

employer to reduce exempt amount, employer is to 

calculate “take home pay” as if second job did not 

exist 

Payments to IRS are to be remitted on pay date to 

employee

Federal Tax Levy – Example 

Employee paid bi-weekly $1,600 

• Part 3 Form 668 W - Married/Joint 2 Exemptions 

Deductions 

• Fed Tax $ 85 

• SS Tax 99 

• Medicare Tax 23 

• State Tax 40 

• 401(k) (3%) 48 

• Health Ins 55 

• Garnishment 50 

------- 

• Total Deductions $ 400 

● Take Home Pay: $1,600 – 400 = Take Home Pay

IRS Publication 1494 - 2010

Federal Tax Levy – Example 

Take Home Pay 

• $1,200 ($1,600 - $400) 

Exempt Amount (Table – Pub 1494) 

• $ 719.23 

Amount Subject to Levy 

• $480.77 ($1,200 - $719.23) 

• New voluntary deductions should not reduce amount 

subject to levy

Tax levies 

• Employer should not stop withholding until Form 

668-D, Release of Levy/Release of Property from Levy 

received 

• If employee no longer working, or terminates 

employment while levy in place, return Part 3 to IRS 

with employee’s last known address 

• If employer chooses to ignore tax levy, employer is 

liable for full amount plus interest, and 50% penalty 

of amount recovered by IRS 

• Voluntary deduction agreement – “Payroll Deduction 

Agreement” – may prevent levy for employee

Tax Levies 

QUESTIONS ?

Creditor garnishments 

Wage garnishment – legal means by which the 

person owed the money can obtain payment 

Creditor must obtain a court order to withhold 

before employer is required to withhold for debt 

Consumer Credit Protection Act (CCPA) governs 

amount that can be garnished and freedom to 

discharge an employee because employee’s wages 

have been garnished 

Amount cannot exceed 25% of disposable earnings 

or federal minimum hourly wage times 30

Creditor garnishments 

• Disposable earnings = gross minus deductions required 

by law (federal, state & local income tax, Social Security 

& Medicare, state unemployment or disability tax, and 

mandated payments for state employee retirement 

systems) 

• Wages already subject to withholding for child support 

orders, tax levies, or bankruptcy orders are not 

considered deductions required by law 

• Employer cannot terminate employment if employee’s 

“earnings have been subjected to garnishment for any 

one indebtedness”; watch state laws also

Creditor Garnishments 

State Regulations Include: 

• Amount Subject to Garnishment 

• Priority of Multiple Garnishments 

• Duration of Garnishment 

• Time Limits for Remitting Withheld 

Amounts 

• Administrative Fee & Penalties

Maximum Amount of Disposable to Garnish 

Lesser of: 


25% of Disposable for Week, or 

The amount of the disposable earnings that 

exceed 30 times the federal minimum wage 

(30 x $7.25 = $217.50)

Creditor Garnishments - Example 1 

EE’s Weekly Disposable Earnings = $250 

• Garnishment for $300 

Lesser of: 

• 25% of Disposable = $62.50 

• $250 - $217.50 = $32.50 

Maximum Amount to Withhold = $32.50

Creditor Garnishments - Example 2 

Multiple garnishments - Take ‘Into Account’ Other 

Garnishments 

Weekly disposable is $500 

• 25% of disposable = $125 

• Disposable – 30 x Fed Min Wage ($500 - $217.50 = $282.50) 

• Maximum Amount to withhold = $125 

Deduct garnishment of higher priority (ie: child support) 

Child support deduction for $100 

$125 - $100 = $25 (amount to withhold for creditor garnishment)


QUESTIONS ?

Bankruptcy 

Governed by Federal Bankruptcy Code 

Cease Other Garnishments (except child support) 

Amounts Paid to Trustee 

Priority – Takes priority over any other claim, 

including federal and state tax levies received before 

the order, other than Child Support Orders 

Discharge of Employee Prohibited 

Beware of post petition debts

Bankruptcy 

QUESTIONS ?

Student Loans & Federal Agency 

- Debt Collections 

HEA – Higher Education Act of 1991 – for payment of 

delinquent loans 

DCA – Debt Collection Improvement Act of 1996 – allows 

federal govt agencies that provide (non-tax) funds to 

individuals to garnish for nonpayment (including student 

loans from the US Department of Education) 

HEA’s and DCA’s generally withhold 15% of disposable – 

CCPA limits apply 

DCA’s definition of disposable includes health insurance

Student loan collections 

Student loan garnishments have restrictions: 

• No more than the lesser of 15% of disposable income or 30 

times federal hourly minimum wage 

• If more than one student loan garnishment received, total 

garnished amount is the lesser of 25% of disposable income 

or 30 times federal hourly minimum wage 

• Employee cannot be terminated because of garnishment 

• Employer should continue to withhold until a release is 

received 

• Notify agency if employee terminates employment

Student Loan Collections 

• If employee is laid off or involuntarily separated 

within 12 months, employee has 12 months from 

date of reemployment before order becomes 

effective again 

• Employers who fail to comply with student loan 

collection order is liable for amount not withheld, 

punitive damages, court costs, & attorney fees

Student Loans & Federal Agency 

- Debt Collections 

Q u e s t i o n s ??

Federal Wage Hour Law 

Restrictions on Deductions 

FLSA - restrictions on deductions when they bring the employee’s 

wages below minimum wage and overtime pay guaranteed by the 

Act. 

• Board, lodging, & other facilities 

• can be deducted and can cause wages to fall below minimum wage if 

accepted voluntarily by the employee and is for employee’s benefit 

• Buying & maintaining uniforms 

• Required uniforms that cannot be worn used as “normal streetwear” 

and employer pays for uniform, cleaning & maintenance the cost 

deductions cannot reduce pay below minimum wage



• Loans to employees 

• deduction for principal can reduce wages below minimum 

wage; 

• interest or admin cost deductions cannot reduce wages below 

minimum wage 

• Salary advances & overpayments 

• deductions due to bookkeeping errors can reduce pay below 

minimum wage. Employee and FLSA minimum wage laws do not 

apply



• Docking pay for missed time 

• if deduction equals pay for time lost, no FLSA violation has occurred; 

it can be deducted. 

• if an additional penalty amount is deducted, that amount cannot 

reduce the employees wages for the minimum required for the hours 

actually worked – that would constitute pay below FLSA minimum 

wage. 

• Deductions for taxes 

• Taxes for Federal, State and local income taxes, and the 

employee’s share of Social Security and Medicare are considered 

wages paid to employee and FLSA minimum wage laws do not 

apply 

• Employer cannot deduct any amount from employee’s wages to 

pay employer’s share of any tax

• Garnishments & Wage assignments 

• can be deducted even if deduction(s) reduce pay below FLSA 

minimum wage laws 

• Any amount deducted in excess of the CCPA limits cannot 

reduce the wages below FLSA minimum wage laws 

• Union Dues 



• if required by union contract, FLSA minimum wage laws do not 

apply and it can be taken 

• Cash Shortages, Bad Checks 

• Employers may not take the deduction from non-exempt 

employees, if the deduction will reduce pay below FLSA 

minimum wage; it cannot be taken



• Employer Insurance Bonds - employer buys an insurance 

policy against fraud and negligence attributed to the employee – 

“bonds” the employee 

• Employer cannot required the employee to pay for the insurance 

before the employee starts employment 

• Cost of the bond may be spread out and deducted from the 

employees wages, but only to the extent the deductions do not 

reduce the employee’s wages below FLSA minimum wage



Q u e s t i o n s ??


Statutory Deductions also known as “Involuntary 

Deductions” are deductions which an employer or 

employee has no control because they are required by 

law. 

Six of Seven types: 

• Tax levies 

• Creditor Garnishments 

• Bankruptcy orders 

• Student Loan Collections 

• Federal Agency Debt Collections 

• Federal Wage-Hour Law Restrictions on Deductions

Marlene Mitten Garnishment Manager Hewitt Associates

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