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The federal government does play a multipurpose role in regulating and managing the flow of work in their territory. The system of executing and planning is quite elaborate and deep-rooted. It is expanded to nearly every possible horizon to attain sole authority of activities in their respective territory. Several sets of rules and regulations have been suggested over some time to maintain the decorum and flow of functioning intact.

Garnishment of wage garnishment could be defined as a derivation of certain taxes by a third party. The third party is also referred to as garnishee. It is a legal procedure done under the supervision of the IRS where a certain amount is withheld from an employee’s paycheck and sent to another party. Here, another party is usually referred to as garnishee or the debtor’s employer. Garnishment taxes are unpaid taxes, monetary penalties, child support payments, and defaulted student loans. Sometimes, assets are also seized by the employees who are held accountable for unpaid debts. According to the Garnishment law, 25% of disposable wages could be garnished. 

Title III of the Consumer Credit Protection Act (CCPA) is regulated by the Wage and Hour Division. The CCPA safeguards employees from irrational termination by their employers as their wages have been garnished for any one debt. It restricts the number of an employee’s earnings that may be garnished within a week. It applies to all employers and employees who earn through personal services such as wages, salaries, commissions, bonuses, and periodic payments from a pension or retirement program, but ordinarily does not include tips.  

What employers need to know about Wage Garnishment

Employers act as a mediatory authority that looks after the process of garnishment primarily. According to an employers-oriented analysis, a corporation’s scale or size, industry type, and location of the employee workplace play a vital role in deciding the garnishment pattern for an employee. Employers should have elucidated insights about the factors that affect the garnishment status in corporations. 

State or federal bankruptcy, court-ordered or private child support, state or federal tax levy, and a category consisting of all remaining judgments such as student loans or consumer loans. Employees should stay aware of the basic pattern of calculating garnishment, that is, the rate of garnishment was calculated as a percentage of employees having their wages garnished compared to their aggregate workforce. A study revealed that nearly 7-9% of the US workforce had their wages garnished.

Focusing on withholding requirements for wage garnishment, the parameters are quite specific. The garnishment law allows up to 50% of a worker’s disposable earnings to be garnished when they have a spouse or children to support, otherwise up to 60% of disposable earnings could be garnished. Wage garnishment is not a voluntary wage assignment, which reflects that employees or workers intentionally don’t turn in to report their portion of income to be withheld. Nearly gains or earnings that are categorized as benefits and assurances are exempted from garnishment. Exempted earnings of wage garnishment are as follows:

  • Compensation for the death, injury, or detention of employees of US contractors outside the US territory
  • Foreign service retirement or disability benefits 
  • Merchant Seamen Wages or Longshoremen’s and Harbor Workers’ Death and Disability Benefits
  • Railroad retirement benefits 
  • Student assistance 
  • Military annuities and survivor’s benefits 
  • Civil service and federal retirement and disability benefits 
  • Veteran’s benefits 
  • Supplemental security income benefits or social security benefits 

How to process the garnishments 

Title III recommends suggestive guidelines and limits for regulating the garnishment procedures. The parameters and limits paved by Title III are fixed variables and don’t fluctuate. The WHD specifies that for ordinary garnishments for those who are not counted in for support, bankruptcy, or any state or federal tax, the weekly garnishment could be done but not exceed the two-figure criteria. 

 Garnishment often occurs when a creditor reports a non-payment and wins over this claim in court. Urgent or forced garnishments could also occur in the case of child support systems, back taxes, or a balance on federal student loans. The court’s role is to notify the taxpayer, bank, and your employer and the process of garnishment will begin post 30 days of notification. 

Child Tax Credit and Wage Garnishment: How does that work? 

Child support tax credit is a crucial aspect of wage garnishment chores – one of the major payments that are given immense priority. The Child Tax Credit is partially refundable for parents with dependent children. With dependent children, governments count eligible taxpayers’ children who satisfy the allowance’s age and relation criteria. This tax benefit could be claimed by filing Form 1040 and attaching Schedule 8821 to the return. The plan gets updated annually based on inflation adjustments and other parameters. The plan reflected the economic and health paradigm society and citizens suffered during the pandemic. The orientation and motive of the program are precise as to provide legitimate taxpayers, before or after fully refundable status, every accountable child with a tax credit by neglecting the taxpayer status or not. The Congressional Research Service reflected that 1 of 5 taxpayers with eligible children falls into the range of qualifying for the benefits of the plan. 

To qualify for eligible dependent status, the candidate must be a US citizen or US alien resident, meeting the residency, age, and dependency requirements. In addition, the dependent must have lived with the person claiming the tax credit for at least half of the tax year. How can one claim a Child Tax Credit? Due to the recent upgrade of fully refundable status, taxpayers can claim Child Tax Credit even after not filing federal tax returns. To claim the Child Tax Credit, the taxpayer must file Form 1044 and US Individual Income Tax Return Form attached with Schedule 8812, Credits for Qualifying Children and Other Dependents. Schedule 8812 determines the amount of credit an eligible taxpayer and calculates any notification about excess credits. 

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