Wage Garnishment Compliance Flashcards

An employee works in State A but lives in State B. A court in State B issues a creditor garnishment. Which state's exemption rules should the employer apply?

Answer: State A, the state of employment

Generally, the garnishment exemptions of the state where the employee works (State A) govern, though employers should verify specific state law requirements.

When remitting garnished wages to the court or creditor, how frequently must employers typically remit under most state laws?

Answer: Each pay period

Most states require employers to remit withheld garnishment funds to the court or creditor each pay period, though deadlines vary by state.

A terminated employee's final paycheck is subject to a garnishment order. Must the employer still withhold from that final payment?

Answer: Yes, the garnishment applies to the final paycheck as wages owed

Garnishment orders typically remain in effect and apply to all wages owed, including the final paycheck, until the order is released or satisfied.

Which form does an employer use to notify the IRS that a federal tax levy cannot be fully honored because of other garnishments?

Answer: Form 668-D

Form 668-D is the Release of Levy/Release of Property from Levy, but to report priority issues employers communicate directly with the assigned IRS revenue officer; Form 668-W is the levy notice served on employers.

What is the employer's potential penalty for willfully failing to honor a valid court-issued wage garnishment order?

Answer: Contempt of court, fines, or liability for the unpaid debt amount

Willful failure to comply with a court garnishment order can result in contempt of court, civil penalties, and the employer being held liable for the amount that should have been withheld.

Under which circumstance may an employer legally deduct administrative fees from an employee's wages in connection with garnishment processing?

Answer: Only when state law expressly permits an administrative fee and the employee's net pay remains above minimum wage after the fee

Some states allow employers to deduct a small administrative fee per pay period for processing garnishments, provided state law permits it and the fee does not reduce net pay below minimum wage thresholds.

How long must employers typically retain records related to wage garnishment orders and withholdings?

Answer: At least 3 years, consistent with FLSA recordkeeping requirements

FLSA recordkeeping rules require employers to retain payroll records, including garnishment-related records, for at least three years.