Wage Garnishment Compliance Flashcards

For federal tax levies (IRS Form 668-W), how is the exempt amount from levy determined?

Answer: It is based on the employee's standard deduction and personal exemptions claimed on a Statement of Exemptions

The IRS exempt amount is calculated from the employee's filing status and number of exemptions as stated on IRS Publication 1494 tables and the employee's completed exemption statement.

If an employee fails to return the exemption statement (Part 3 of Form 668-W) within three business days, how should the employer treat the levy?

Answer: Withhold as if the employee is single with zero exemptions

If the employee does not return the exemption form, the employer must withhold as if the employee is married filing separately with one exemption — effectively single with zero, using the lowest exempt amount.

A student loan garnishment issued under the Higher Education Act (HEA) limits withholding to what maximum percentage of disposable pay?

Answer: 15%

Administrative wage garnishments for defaulted federal student loans are capped at 15% of disposable pay under the HEA.

Under Title III of the CCPA, 'disposable earnings' is best defined as:

Answer: Wages remaining after legally required deductions

Disposable earnings are the portion of earnings left after legally required deductions such as federal, state, and local taxes, Social Security, Medicare, and state unemployment insurance.

Which of the following deductions does NOT reduce gross wages to 'disposable earnings' for garnishment purposes?

Answer: Voluntary 401(k) contributions

Voluntary deductions such as 401(k) contributions, health insurance premiums elected by the employee, and union dues do not reduce gross pay for disposable earnings calculations.

An employer receives a garnishment order on Monday for wages earned the prior week that have already been paid. What is the employer's obligation?

Answer: The order does not apply to already-paid wages; begin withholding from next pay period

Garnishment orders only apply prospectively to wages not yet paid; wages already disbursed cannot be recouped under the order.

Which type of income is generally exempt from most creditor wage garnishments under federal law?

Answer: Social Security benefit payments

Social Security benefits are generally protected from ordinary creditor garnishments under federal law, though they may be subject to garnishment for child support, alimony, and federal tax debts.