Fundamental Payroll Involuntary and Voluntary Deductions Questions and Answers

Question 1

An employee has a gross pay of $1,200. Legally required deductions (federal, state, FICA taxes) total $250. The employee also has voluntary post-tax deductions for union dues ($20) and a charitable contribution ($30). For the purpose of calculating a creditor garnishment, what are the employee's disposable earnings?

Accepted Answer

$950

Answer

Disposable earnings, as defined by the Consumer Credit Protection Act (CCPA) for garnishment purposes, are the gross earnings minus only legally required deductions. Voluntary deductions like union dues and charitable contributions are not subtracted. Therefore, the calculation is $1,200 (Gross Pay) - $250 (Legally Required Deductions) = $950.

Question 2

An employee is subject to a child support order. They do not support another spouse or child and are more than 12 weeks in arrears. According to the Consumer Credit Protection Act (CCPA), what is the MAXIMUM percentage of their disposable earnings that can be withheld?

Accepted Answer

65%

Answer

The CCPA sets the maximum for child support withholding at 60% of disposable earnings if the employee is not supporting another spouse or child. This limit increases by an additional 5% (to 65%) if the support payments are more than 12 weeks in arrears.

Question 3

An employer receives a federal tax levy, a creditor garnishment, and a child support order for an employee. Which of these involuntary deductions generally has the highest priority?

Accepted Answer

Child support order

Answer

The generally accepted order of priority for involuntary deductions places child support orders first. Federal tax levies are typically second, followed by other federal, state, and local garnishments, with creditor garnishments having a lower priority.

Question 4

Which of the following is a key characteristic of a voluntary wage assignment?

Accepted Answer

The employee can typically revoke it at any time.

Answer

A voluntary wage assignment is an agreement between an employee and a creditor, and unlike a court-ordered garnishment, the employee can usually revoke the authorization in writing at any time. It is not court-ordered, and the CCPA's protections on withholding limits do not apply to these voluntary arrangements.

Question 5

Under the Consumer Credit Protection Act (CCPA), the amount of an employee's disposable earnings that can be garnished for an ordinary debt (not child support or taxes) is the lesser of 25% of disposable earnings or the amount by which disposable earnings exceed:

Accepted Answer

30 times the federal minimum wage.

Answer

The CCPA protects a certain amount of an employee's earnings from garnishment. For ordinary garnishments, the maximum amount that can be withheld is the lesser of 25% of disposable earnings or the amount by which the employee's weekly disposable earnings exceed 30 times the current federal minimum wage.

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Practice Test

Fundamental Payroll Involuntary and Voluntary Deductions Questions and Answers