Set up a payroll garnishment item
PrintOverview
You may have received a letter stating that you must deduct an additional tax amount from an employee's paycheck due to outstanding amounts due to tax agencies.
The Wage Garnishment Order will provide the necessary information, such as the account or case number, for how to post the money.
If you have multiple employees that has this type of garnishment, you should create a new payroll item for each employee. Each item can have the employee's initials in the name of the payroll item, e.g., TAX LEVY-AKA.
Generally, attachments are honored/paid according to the following priorities (there can be exceptions.
American Payroll Association
- Child support orders
- Chapter XIII bankruptcy orders
- Federal tax levies
- Federal agency garnishments
- State tax levies
- Local tax levies
- Creditor garnishments
- Student loan garnishments
Assumptions
You know the amount of the garnishment you want to deduct.
Expected Outcome
Once the garnishment has been deducted from the paycheck, you will be able to pay the appropriate agency as a liability in QuickBooks.
Details
To performs the following tasks, set QuickBooks to single-user mode.
- From the Lists menu, click Payroll Item List.
- Click the Payroll Item button, and select New.
- Select EZ Setup or Custom Setup, and click Next. (For EZ Setup, follow the onscreen instructions.)
- Select the Deduction option, and click Next.
- Type a name for the payroll deduction, such as Child Support Smith for employee Bob Smith, and click Next.
- Enter the name of the agency in which the liability is paid. If you currently do not know the name of the agency, you can add it later.
- Click Next.
- Click the Tax Tracking Type drop-down arrow, and unless instructed otherwise by your accountant, select None.
- Click Next.
- In the Default Taxes window click Next.
- In the Calculate Based on Quantity window, be sure Neither is selected, and click Next. Note: Do not select Hours or Quantity, as those will not calculate the garnish correctly.
- In the Gross vs. Net window, choose Net to calculate amount after taxes. If you choose Gross, it will calculate the deduction the amount before taxes.
- Enter a Default Rate and Limit (if there is one).
- If it's a percentage, add the percentage sign.
- If it's a dollar, add the decimal.
- Click Finish.
Set up a Garnishment Deduction Item in Simple Start.
- Select Payroll on the top toolbar.
- Click Setup and Maintain, and choose View/Edit Payroll Items.
- In the Related Activities section, choose Add Payroll Item.
- Select EZ Setup or Custom Setup, and click Next. (For EZ Setup, follow the on-screen instructions.)
- Select the Deduction option, and click Next.
- Type a name for the payroll deduction, such as Child Support Smith for employee Bob Smith, and click Next.
- Enter the name of the agency in which the liability is paid. If you currently do not know the name of the agency, you can add it later.
- Click Next.
- Click the Tax Tracking Type drop-down arrow, and select None, unless otherwise instructed by your accountant.
- Click Next.
- Select the Default Taxes, and click Next.
- In the Calculate Based on Quantity window, select Neither, and click Next.
- In the Gross vs. Net window, choose Net to calculate amount after taxes. If you choose Gross, it will calculate the deduction amount before taxes.
- Enter a Default Rate and Limit (if there is one).
- If it's a percentage, add the percentage sign.
- If it's a dollar, add the decimal.
- Click Finish.
To set up the Garnishment Deduction Item on the employee record. (e.g., for child support):
Click the Employees drop-down menu, and select Employee Center.
Double-click on the Employees name.
From the Change Tabs drop-down, select Payroll and Compensation Info.
QuickBooks 2013: click the Payroll Info tab.
In the section for Additions, Deductions, and Company Contributions, click in a blank area under Item Name and select your new garnishments item.
In the Amount column, enter the amount to be deducted every pay check.
Click OK.
For information about how to make the garnishment payment see Set up and pay scheduled or custom (unscheduled) liabilities.
Karola3/28/2013