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    Set up a payroll garnishment item

    Article ID: 1000506

    Overview

    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

    1. Child support orders
    2. Chapter XIII bankruptcy orders
    3. Federal tax levies
    4. Federal agency garnishments
    5. State tax levies
    6. Local tax levies
    7. Creditor garnishments
    8. Student loan garnishments

    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.

    Assumptions

    You know the amount of the garnishment you want to deduct.

    Details

    If you have more than 1 employee with a wage garnishment, you need to set up separate payroll items for each garnishment because liability agencies require a case number to distinguish how much is paid for each particular employee.

    To set up a Garnishment Deduction Item through EZ Setup or Customer Setup:

    1. From the Lists menu, click Payroll Item List.
    2. Click the Payroll Item button, and select New.
    3. Select EZ Setup or Custom Setup, and click Next. (For EZ Setup, follow the onscreen instructions.)
    4. Select the Deduction option, and click Next.
    5. Type a name for the payroll deduction, such as Child Support Smith for employee Bob Smith, and click Next.
    6. 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.
    7. Click Next.
    8. Click the Tax Tracking Type drop-down arrow, and unless instructed otherwise by your accountant, select None.
    9. Click Next.
    10. In the Default Taxes window click Next.
    11. 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.
    12. 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.
    13. 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.
    14. Click Finish.

    To set up the Garnishment Deduction Item on the employee record. (e.g., for child support):

    To perform the tasks below, switch QuickBooks to single-user mode.

    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 and higher: 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.

    If the garnishment item was edited, you may need to delete the item from the employee setup and enter the edited garnishment item.
    Regarding Wage Garnishment Order of Precedence (Net Garnishment), QuickBooks reads the net deductions in the order in which they are entered on the employee profile in descending order (top to bottom). If a net deduction is based on a percentage and needs to be calculated before any other net deduction, move it to the top of the net deduction list under Additions, Deductions and Company Contributions in the Employee Profile so it will calculate the correct percentage.
    Assisted Payroll customers: Assisted Payroll does not pay this liability, so you will be responsible for paying this to the appropriate agency. See the garnishment order for payment information.  For child support, you can also view the Office of Child Support Enforcement contact information website.

    For information about how to make the garnishment payment see Set up and pay scheduled or custom (unscheduled) liabilities.

    7 comments

    Ken5/22/2013

    349

    I am currently deducting 65% for a wage garnishent but I do not want this amount to exceed $60 per week max is there any way to automaticly regulate this.

    Reply

    Karola3/28/2013

    11

    I have started a new company file and am trying to enter checks from Jan - Mar to get up to date. I have several garnishment payments that I need to record in check register but I do not know where to code the expense.

    Reply

    Susan4/29/2013

    11

    Hi Karola,

    You would code the expense to the same account the deductions from the employee's paychecks are coded to. Check out Set up and pay scheduled or custom (unscheduled) liabilities for detailed steps about making payments in QuickBooks.

    Heidi4/10/2013

    10

    Each state allows a processing fee to be charged by the employer either by month, or per remittance. Would this be a separate payroll item? How would you set it up?

    Reply

    Susan4/29/2013

    11

    Hi Heidi,

    Yes, you can use this same method described above to add an additional deduction for a processing fee. It is up to you if it should be separate item or keep it part of the other deduction. If it is separate, you can track it separately. Thanks for your comment.

    Kristi4/23/2013

    11

    I set up a wage garnishment for an employee, but when I set up a paycheck it isn't deducted.

    Reply

    Susan5/24/2013

    19

    Hi Kristi,

    Thanks for your comment. There could be a few reasons why the amount isn't deducting from the paychecks. You can refer to the steps above in this article to check the setup. Make sure you have added the item to the employee profile and check the rates and limits.

    Comments can not be added at this time.

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