Garnishment Calculation
Use this subtask to enter and maintain the calculation and limitation rules for federal tax levies, state tax levies, creditor debt garnishments, bankruptcies, and student loan garnishments. You can enter only one Garnishment Calculation record for each Employee Garnishment record.
This subtask is disabled if the Deduction Type on the main screen is Child Support Garnishment or Child Medical Garnishments.
Before entering federal tax levy data on this subtask, you must first do the following:
- Enter the current federal minimum wage amount on the Configure Labor Settings screen.
- Enter or appropriately update the federal tax levy rules on the Manage Federal Tax Levy Exemptions screen
Before entering creditor debt data on this subtask, you must first do the following:
- If the garnishment calculation involves the comparison of two or more calculated amounts to determine the limit and the Limit 1 Calculation Method involves the use of state minimum wage, you must ensure that the employee work state's minimum wage amount is set up on the Manage Minimum Wage screen.
- If the garnishment calculation involves the comparison of two or more calculated amounts to determine the limit and the Limit 1 Calculation Method involves the use of federal minimum wage, you must ensure that the federal minimum wage amount is correct on the Configure Payroll Settings screen.
Garnishment and Employee Information
| Field | Description |
|---|---|
| Total Amount Due |
Enter the total amount due for the garnishment. If you have already paid off some of the garnishment amount in another system, through a different Costpoint deduction, or through a garnishment deduction that was assigned to the employee on the Manage Employee Deductions screen, the Total Amount Due must be the amount from the order less the total amount already paid for the garnishment. This ensures that the total paid against the garnishment does not exceed the amount specified on the order. When you enter a new record, the amount entered in this field defaults in the Payroll Year Beginning Bal field. |
| Payroll Year Beginning Bal |
This field displays the payroll year beginning balance. This is the employee’s remaining balance for the garnishment as of the first day of the payroll year. This amount, along with the Year-to-Date (YTD) garnishment amount paid, is used to determine the employee’s remaining balance each time the garnishment is computed. If you are entering a new record, the Payroll Year Beginning Bal field populates with the same amount as the Total Amount Due field. |
| Number of Dependent Credits |
Enter the number of dependents an employee has for this garnishment. Some states require that the garnishment amount be reduced by a dependent exemption amount or a multiple of a dependent exemption amount. The value you enter here is multiplied by the Weekly Credit Amount Per Dependent in the Credit Amounts group box to determine the dependent credit amount for the employee’s garnishment. If the state does not mandate a credit amount, set the Number of Dependent Credits to 0 and the Weekly Credit Amount Per Dependent to 0.00. |
| Employee is Head of Family |
Select this check box if the state specifies a different creditor debt garnishment calculation or limitation rules for employees that are the head of their family. If you select this check box, set up the Garnishment Limit rules using the rules the state specifies for head of family employees. This optional check box is for information only and is available only if the Deduction Type is Creditor Debt Garnishment or State Tax Levy. |
| Employee is Alaska Resident |
Select this information-only check box if the Deduction Type is Creditor Debt Garnishment, the Work State is Alaska, and the employee is a resident of Alaska. If the employee is a resident of Alaska, set up the Garnishment Limit rules based on Alaska’s rules for resident employees. If the employee is not an Alaska resident, set up the Garnishment Limit rules based on Alaska’s rules for non-resident employees. |
Garnishment Amount
Use this group box to specify the garnishment's calculation rules.
| Field | Description |
|---|---|
| Calculation Method |
From the drop-down list, select a method used to calculate the garnishment. Valid options are:
|
| Percentage |
Enter the percentage that is used to calculate the garnishment withholding. This percentage is from the order. For example, if the garnishment order specifies that the employer must withhold 20% of disposable income, enter 20% in this field. This field is enabled and required if the Calculation Method is Percent of Gross, Percent of Net Pay, or Percent of Disposable Income and the Garnishment Status is Active, On Hold, or Pending Completion of Prior Garnishment. |
| Fixed Amount |
Enter the fixed withholding amount specified on the garnishment order. When payroll is computed, the following calculation is used to determine the employee's garnishment amount: (Fixed Amount x Pay Frequency from Order) / Employee's Pay Frequency This field is required if the Calculation Method is Fixed Amount. If the garnishment is based on a fixed amount, you must also select a Pay Frequency from Order. |
| Pay Frequency from Order |
If you selected a Calculation Method of Fixed Amount, use the drop-down list to select the payment frequency specified on the order. The following calculation is used to determine the employee’s garnishment amount: (Fixed Amount x Pay Frequency from Order) / Employee’s Pay Frequency Valid options are:
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| Override Calculated Pay Period Amount |
Although Deltek does not recommend this, you may find that you need to override the calculated garnishment withholding amount during one or several pay periods. If this occurs, select this check box to override the calculated amount. Selecting this check box enables the Pay Period Override Amount field. If you select this check box, theGarnishment Limit is not applied to the override amount, so it is imperative that you understand the state rules and regulations concerning support order withholdings. The Pay Period Override Amount acts as a pay period limit. This is important when you have more than one paycheck in a pay period (for example, a bonus paycheck and a regular paycheck). When you enter a Pay Period Override Amount, the total amount withheld for the support order within a pay period cannot exceed the Pay Period Override Amount. Assume that the Pay Period Override Amount is $300.00 and the entire $300.00 is withheld when the employee is paid his bonus for the pay period. If you then run a regular payroll, no amount is withheld for the support order because the full $300.00 override amount was already fulfilled via the bonus payroll. When it is no longer needed, you must discontinue the override amount by clearing the Override Calculated Pay Period Amount check box. |
| Pay Period Override Amount |
If you selected the Override Calculated Pay Period Amount check box, enter an override amount in this field. The amount entered is not subject to any garnishment limits. |
Garnishment Limit
Use this group box to specify if a limit must be applied to the garnishment amount and the calculation rules for that limit.
| Field | Description |
|---|---|
| Limit Calculation Method |
From the drop-down list, select how the garnishment limit is calculated. Valid options are:
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Federal Tax Levy
This group box is available only if the Limit Calculation Method is Use Federal Tax Levy Rules.
Use this group box when calculating a federal tax levy or a state tax levy that uses IRS tax levy calculation rules. You can specify the status selected by the employee on the 668-W form. You must also enter the date on which the employee signed the 668-W form. This is important because the IRS tax levy withholding tables are updated each year, and the 668-W signing date determines which withholding table to use. You can also specify whether or not the employee’s spouse is blind and/or 65 years of age or older.
| Field | Description |
|---|---|
| 668-W Filing Status |
Use this drop-down list to specify the status selected by the employee on the 668-W form that was completed upon receiving the levy notice. Valid options are:
This field is enabled and required if the Garnishment Status is Active, On Hold, or Pending Completion of Other Garnishment, and the Limit Calculation Method is Use Federal Tax Levy Rules. |
| Date Form 668-W Signed |
Enter, or click
This field is enabled and required if the Garnishment Status is Active, On Hold, or Pending Completion of Other Garnishment, and the Limit Calculation Method is Use Federal Tax Levy Rules. |
| 668-W Exemptions |
Enter the number exemptions claimed by the employee on the 668-W(c)(DO) form. This number is multiplied by the Amount Per Exemption from the Manage Federal Tax Levy Exemptions screen. The 668-W Filing Status and Date Form 668-W Signed values determine which federal tax levy exemption record is used as the data source. This field is enabled and required if the Garnishment Status is Active, On Hold, or Pending Completion of Other Garnishment, and the Limit Calculation Method is Use Federal Tax Levy Rules. |
| Spouse is Blind |
Select this check box if the employee's spouse is blind. If you select this check box, the employee receives an extra exemption amount, which lowers his federal tax levy withholding. The employee receives an exemption equal to the amount stored in the 65 Years and/or Blind field on the Manage Federal Tax Levy Exemptions screen. This check box is enabled if the garnishment is not fully paid and the Limit Calculation Method is Use Federal Tax Levy Rules. |
| Spouse is 65 or Older |
Select this check box if the employee’s spouse is 65 or older. If you select this check box, the employee receives an extra exemption amount, which lowers his federal tax levy withholding. The employee receives an exemption equal to the amount stored in the 65 Years and/or Blind field on the Manage Federal Tax Levy Exemptions screen. This check box is enabled if the garnishment is not fully paid and the Limit Calculation Method is Use Federal Tax Levy Rules. |
to select, the date on which the employee signed the 668-W form. This is important because the IRS tax levy withholding tables are updated each year, and the 668-W signing date determines which withholding table to use.
Limit 1
Use this group box to specify one of two withholding limit options.
The federal government’s CCPA regulations state that the creditor debt withholding amount must be the lesser of:
- 25% of the employee’s disposable earnings, or
- The amount by which the employee’s disposable earnings exceed the product of (30 x federal minimum wage)
- 25% of the employee’s disposable earnings, or
- The amount by which the employee’s disposable earnings exceed the product of (40 x state minimum wage)
Note that the multiplier differs from the federal multiplier (40 instead of 30) and the state minimum wage is being used in the calculation, rather than the federal minimum wage. Costpoint allows the entry of each state’s Limit 1 Multiplier and the source of the minimum wage amount.
Federal law mandates that employers must use the calculation (between the federal and state regulations) which results in the least amount of money being withheld from the employee. Therefore, Costpoint calculates the federal withholding limits and the state withholding limits, and then uses the lesser of those limits.
States may also specify an exemption amount which decreases the disposable income used in the state withholding calculation. This is not part of the federal government’s CCPA requirements, but is more beneficial to the employee. Some states also specify a special exemption amount for head-of-household employees.
| Field | Description |
|---|---|
| Limit 1 Calculation Method |
From the drop-down list, select the calculation used for the first state limit:
This field is enabled if the Limit Calculation Method is Use Creditor Debt Rules or Lesser of Limit 1 and Limit 2. |
| Limit 1 Multiplier |
Enter the minimum wage multiplier specified by the state. For example, if the state specifies that the withholding limit option is the amount by which disposable income exceeds the product of (40 x Federal Minimum Wage), you would enter 40 in this field. In short, this is the amount that is multiplied by the appropriate minimum wage amount to reduce the disposable income used to pay the garnishment. This field is required if the Limit 1 Calculation Method is one of the following:
|
| Limit 1 Weekly Exemption |
Enter the exemption amount specified by the state. For example, an Oregon employee is entitled to an exemption amount of $196.00 of weekly wages. This means that the employee’s weekly net pay must be at least $196.00. The Limit 1 Weekly Exemption amount is a weekly amount, which is converted to accommodate the employee’s pay frequency when payroll is computed. For example, if a weekly exemption amount of $100.00 is specified, the Compute Payroll application automatically converts this to $200.00 for an employee with a bi-weekly pay frequency. This field is required if the Limit 1 Calculation Method is one of the following:
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Limit 2
If the state requires that an employer withhold the lesser of two calculated amounts (such as a creditor debt garnishment or a state tax levy where the state instructs the employer to use creditor debt calculation rules), you can use this group box to enter the data needed for both calculations.
The federal government’s CCPA regulations state that the creditor debt withholding amount must be the lesser of:
- 25% of the employee’s disposable earning, or
- The amount by which the employee’s disposable earnings exceed the product of (30 x federal minimum wage)
Most states use the federal CCPA rules for creditor debt garnishment, but some states use similar state withholding limit options that are more beneficial to the employee. For example, a state’s creditor debt withholding limit regulations may be as follows:
- 15% of the employee’s disposable earning, or
- The amount by which the employee’s disposable earnings exceed the product of (40 x state minimum wage)
Note that the percentage of disposable income differs from the federal percentage of disposable income (15% instead of 25%). Costpoint accommodates the entry of each state’s Limit 2 percentage of disposable income and any exemption amounts that reduce the disposable income amount.
Federal law mandates that employers must use the calculation that results in the least amount of money being withheld from the employee. Therefore, Costpoint calculates the federal withholding limits and the state withholding limits, and then takes the lesser of those limits.
States may also specify an exemption amount that decreases the disposable income used in the state withholding calculation. This is not part of the federal government’s CCPA requirements, but is more beneficial to the employee. Some states also specify a special exemption amount and/or disposable income percentage for head-of-household employees.
| Field | Description |
|---|---|
| Limit 2 Calculation Method |
From the drop-down list, select the calculation used for the second state limit. Valid options are:
This field is enabled if the Limit Calculation Method is Use Creditor Debt Rules or Lesser of Limit 1 and Limit 2. |
| Limit 2 Percentage |
Enter the percentage for the second state limit. This percentage is either applied to gross wages or disposable income. Most states use the federal CCPA limit for this (25% of disposable income). However, some states use a percentage that is more beneficial to the employee. For example, Delaware specifies that the withholding limit must be the lesser of:
In this case, you would enter 15% in the Limit 2 Percentage field. This field is required if the Limit 2 Calculation Method is Percent of Gross or Percent of Disposable Income. If the Limit 2 Calculation Method is not Percent of Gross or Percent of Disposable Income and you do not enter a value in this field, 0.00% defaults into this field when you save the record. |
Credit Amounts
If the state requires that the employer reduce the calculated withholding by a personal and or dependent credit amount, you can use this group box to specify the weekly personal and weekly dependent amount. A credit amount does not reduce the garnishment withholding wage base (disposable income, gross wages, or net pay).
| Field | Description | ||||||
|---|---|---|---|---|---|---|---|
| Weekly Credit Amount |
Enter a weekly personal credit amount which is multiplied by the employee’s Number of Personal Credits to determine the total personal credit amount. Some states specify a weekly fixed credit amount to reduce the garnishment withholding amount. For example, the state tax levy instructions for Rhode Island instruct employers to withhold 100% of net pay less $75 plus $25 for each dependent. The $75 is considered a personal credit amount and you would enter 75.00 in the Weekly Credit Amount field. The Weekly Credit Amount must be a weekly amount. |
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| Weekly Credit Amount Per Dependent |
Enter a weekly dependent credit amount which is multiplied by the employee’s Number of Dependent Credits to determine the total dependent credit amount. Some states specify a weekly fixed credit amount to reduce the garnishment withholding amount. For example, the creditor debt garnishment instructions for North Dakota state that the maximum amount subject to creditor debt garnishment in any work week must be reduced by $20 for each dependent family member living with the employee. In this case, the $20 is considered a dependent credit amount, and you would enter $20.00 in the Weekly Credit Amount Per Dependent field. In another example, the state tax levy instructions for Rhode Island instruct employers to withhold 100% of net pay less $75 plus $25 for each dependent. The $25 is considered a dependent credit amount, and you would enter $25.00 in the Weekly Credit Amount Per Dependent field. |
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| Reduce by All Higher Priority Garnishments |
Select this check box if federal or state law mandates that the calculated garnishment withholding amount must be reduced by the employee’s higher priority garnishment amounts. This check box is enabled for all types of garnishments except child support garnishments. This option is mandated mainly for student loan garnishment calculations. If an employee has a student loan garnishment along with other garnishments, the student loan garnishment rules specify that the student loan withholding must not exceed the student loan garnishment limit less any higher priority garnishment amounts. When an employee has both a student loan garnishment and a support order, the support order always takes precedence, even if the student loan was received first. Because the support order has priority over the student loan garnishment, the student loan garnishment limit is calculated as follows: (25% x Disposable Income) – Support Order Amount |
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| Example |
Joe Smith has both a student Loan and a support order garnishment. The support order has a higher priority. Support Order Amount = $175.00 Student Loan Garnishment Limit = $200.00 (25% x 800.00) The employer can only withhold the difference between the student loan garnishment limit and the support order amount.
If you select this check box, you cannot also select one or more of the following check boxes because it could cause the same garnishment amount to be credited twice:
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| Reduce by Higher Priority Federal Tax Levy Amount |
Select this check box if federal or state law mandates that the calculated garnishment withholding amount must be reduced by the employee’s federal tax levy withholding amount. This check box is enabled only if the Deduction Type is Creditor Debt Garnishment or State Tax Levy. For example, state creditor debt garnishment rules limit the amount that can be withheld from an employee to protect the employee from having too much withheld (and being left with too little net pay). Some states mandate that if an employee has federal tax levy and a creditor debt garnishment and the federal tax levy was received before the creditor debt garnishment (the federal tax levy has higher priority), the total of the two cannot exceed the creditor debt garnishment limit. In this situation, states may mandate that the employer must first withhold for the federal tax levy and only withhold for the creditor debt garnishment if the federal tax levy withholding amount is less than the calculated creditor debt garnishment limit. |
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| Example |
Joe Smith has both a federal tax levy and a creditor debt garnishment. The federal tax levy has a higher priority than the creditor debt garnishment because it was received first. Federal Tax Levy = $175.00 Creditor Debt Garnishment Limit = $200.00 The employer can only withhold the difference between the creditor debt garnishment limit and the federal tax levy amount.
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| Reduce by Medical Insurance Amount |
Select this check box if federal or state law mandates that the calculated garnishment withholding amount must be reduced by the total of medical insurance deduction amounts. For example, Maryland mandates that the amount withheld for a state tax levy order received on or after 7/1/2002 be the result of this calculation: (25% x DI): Medical Insurance Deduction Amt |
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| Example |
Jane Smith has both a State Tax Levy garnishment and also pays a total of 185.00 in medical insurance premiums each pay period. Medical Insurance Premiums = $185.00 State Tax Levy = (25% x 1000) = $250.00 The employer can only withhold the difference between the calculated State Tax Levy amount and the total of the Medical Insurance Premiums.
This check box is enabled only if the Deduction Type is State Tax Levy. |
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| Reduce by Support Amount |
Select this check box if federal or state law mandates that the employee’s calculated garnishment withholding amount must be reduced by the total of his support order withholdings (if applicable). This check box is enabled only if the Deduction Type is State Tax Levy. For example, state creditor debt garnishment rules limit the amount that can be withheld from an employee to protect the employee from having too much withheld (and being left with too little net pay). Support orders must always have a higher priority than creditor debt garnishments. States mandate that if an employee has a support order and a creditor debt garnishment, the total of the two cannot exceed the creditor debt garnishment limit. Because support orders have a higher priority, the employer can only withhold for the creditor debt garnishment if the employee’s total support order withholding does not exceed the creditor debt garnishment limit. |
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| Example |
Joe Smith has both a support order and a creditor debt garnishment. Support Order Amount = $150.00 Creditor Debt Garnishment Limit = $200.00 The employer can only withhold the difference between the creditor debt garnishment limit and the support order amount.
It is important to note that if the child support amount is exempt from an employee's disposable income, this check box must not be selected because not only would the wage base be reduced by the support order amount, but the calculated garnishment would also be reduced by the support order amount. |