CPM Wage Garnishment Compliance 3

Question 1

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

Accepted Answer

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

Answer

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.

Question 2

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?

Accepted Answer

Withhold as if the employee is single with zero exemptions

Answer

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.

Question 3

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

Accepted Answer

15%

Answer

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

Question 4

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

Accepted Answer

Wages remaining after legally required deductions

Answer

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.

Question 5

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

Accepted Answer

Voluntary 401(k) contributions

Answer

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.

(CPM) Certified Payroll Manager Practice Test

(CPM) Certified Payroll Manager Practice Test

CPM Wage Garnishment Compliance 3