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TiffanyYachts
Level 1

Garnishment

I have a Garnishment to set up and the deduction cannot cause the net pay to go below a certain level.  Is there a way to set this up in Quickbooks so that I do not have to change it manually every time?

7 Comments 7
Angelyn_T
QuickBooks Team

Garnishment

Hello there, @TiffanyYachts.

 

QuickBooks Desktop (QBDT) calculates the deduction automatically based on the setup of the item. Make sure that you've set up your garnishment payroll item correctly to reduce the amount of your net pay. Please ensure to select Neither under the Calculate Based on Quantity window and choose Net to calculate amount after taxes in the Gross vs. Net window. Allow me to help guide you how.

d1.PNG

 

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. Go to Lists at the top menu bar.
  2. Select on Payroll Item List.
  3. Click the Payroll Item button, and select New.
  4. Select EZ Setup or Custom Setup, and click Next. (For EZ Setup, follow the onscreen instructions.)
  5. Select the Deduction option, and click Next.
  6. Type a name for the payroll deduction, such as Child Support Smith for employee Bob Smith, and click Next.
  7. 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.
  8. Click Next.
  9. Click the Tax Tracking Type drop-down arrow, and unless instructed otherwise by your accountant, select None.
  10. Click Next.
  11. In the Default Taxes window click Next.
  12. In the Calculate Based on Quantity window, be sure Neither is selected, and click Next. Do not select Hours or Quantity, as those will not calculate the garnish correctly.
  13. 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.
  14. 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.
  15. Click on Finish.

To set up the Garnishment Deduction Item on the employee record. (e.g., for child support), make sure to switch to the single-user mode before performing these tasks:

 

  1. Click the Employees drop-down menu, and select Employee Center.
  2. Double-click on the Employees name.
  3. Click the Payroll Info tab.
  4. In the section for Additions, Deductions, and Company Contributions, click in a blank area under Item Name and select your new garnishments item.
  5. In the Amount column, enter the amount to be deducted every pay check.
  6. Click OK.

After setting up the item correctly, it automatically calculates the deduction when creating a paycheck.

d1 ...PNG

 

To learn more, you can check this article: Set up a payroll garnishment item.

 

You can always reach out to me directly by adding a comment below if you have any other payroll and garnishment concerns and if you're referring to something else. I'll be always here to help you!

odatbyGrace
Level 1

Garnishment

The most common garnishment is a certain percentage of disposable earnings.  Disposable Earnings is strictly gross less taxes.  If an employee has health insurance deductions (pre or post tax) HOW can I set up a garnishment to take (for example) 25% of disposable earnings and also deduct the health insurance deductions also?  Example, Gross pay is $1,100.  taxes are $100. health insurance is $200.  The Garnishment should be $250.  If I select the deduction to calculate on Gross, the garnishment is $275, if I calculate on net, the garnishment is only $200. I am using Desktop Pro Plus 2018

Thanks

Susy

KhimG
QuickBooks Team

Garnishment

Hello there, @odatbyGrace.


Thanks for sharing detailed information about the payroll calculation of one of your employee's deduction item in QuickBooks Desktop.


I replicated your situation and set up an item for both health insurance and garnishment that calculates based on net pay. Then, created a sample paycheck with the exact figures provided to find out that the latter should show an amount of $250.


Let’s verify if the issue has something to do with the setup. Here’s how to create a garnishment in QuickBooks Desktop:

  1. Go to the List menu and choose Payroll Item List.
  2. At the bottom, click the Payroll Item drop-down and select New.
  3. Pick a setup method and hit Next. For EZ Setup, please follow the onscreen instructions.
  4. Move the radio button to Deduction, then click Next.
  5. Enter a name for the deduction, then Next.
  6. Type in the agency name in which the liability is paid and hit Next.
  7. In the Tax tracking type window, make sure to select the right type for the correct tax classification and choose Next
  8. Check if this item is affected by the following taxes, then click Next.
  9. Always choose Neither in the Calculate Based on Quantity window and hit Next.
  10. Select Net to calculate amount after taxes.
  11. Add 25% on the Default Rate box and press Finish.

I recommend creating another deduction item with these steps and use it on employee's paycheck. For the detailed instructions, take a look at this article: Set up a payroll garnishment item.


You may also check out this article as a future reference in changing payroll items used on paychecks: Update incorrect item.


If you ever need anything else, let me know. I'm always here to help. Have a great day!

odatbyGrace
Level 1

Garnishment

These are the same instructions I found online and followed, and the same steps the QB customer support agent followed while streaming on my computer to set up the wage garnishment.  Unfortunately, these instructions do not result in the garnishment being calculated on disposable earnings (Gross - taxes (only)) correctly.  Bottom line - if I select to calculate this garnishment based on net wages, QB calculates 25% of the net check after deducting the health insurance deduction. This is not enough garnishment deducted.  After 2 hours, the QB customer support technician finally admitted that the desktop version of Quickbooks could not accommodate this type of deduction.  I will have to manually calculate this deduction and enter a fixed amount each payroll.

I find this hard to accept because wage garnishment of disposable earnings is the  second most common garnishment in the United States.  The most common is child support and that deduction is also calculated on disposable earnings.  Could there be thousands of payroll departments using quickbooks across the country manually calculating garnishments every payroll, I can't believe that.  There has to be something that I am missing.

 Regarding you being able to replicate the deduction calculating the correct amount, you said you created both the health insurance and the garnishment to calculate based on net pay ... the Heath insurance is a fixed amount deduction, and that seems to make a difference.

FritzF
Moderator

Garnishment

This is certainly not the experience we want you to have, @odatbyGrace.

 

I also replicated this on my sample company file and based it on the information previously provided, and I got the same result. Here are some sample screenshots of what my paychecks looks like:

 

308.PNG 309.PNG

 

 

I know you already followed the steps above, but to make sure that I'm on the same page can you please share a screenshot of the amount calculated on the paychecks? This will help me investigate further on what's causing the issue.

 

Just in case, I'll be adding this article for future reference: Set up a payroll garnishment item.

 

I look forward to hearing from you soon. Take care always!

odatbyGrace
Level 1

Garnishment

Thank you for taking the time to work this out with me.  I made up the previous numbers but the theory holds true.  The following screen shots use a gross pay of 1,285.60.  The total taxes are 162.52.  The total health insurance fixed amount deductions is $157.25.  The Garnishment should be $280.75 ((1,285.60 - 162.52) * 25%).

Here is the screen shot with the wage garnishment calculating on net pay

 

on net pay.JPG

QB is calculating the 25% garnishment on Gross - taxes - health insurances ((1,285.60-162.52-157.25)*25%) = 241.46 ... this is not the correct garnishment.

Here are screen shots of the set up for the deduction

 

WG ded 1.JPG WG ded 2.JPG WG ded 3.JPG WG ded 4.JPG

 

I am sure I am doing something wrong but I cannot see what it is to correct it.  Thank you for your help.

FritzF
Moderator

Garnishment

Thanks for getting back to us and sharing this detailed information, @odatbyGrace.

 

On the screenshot you've provided, both family insurance is pre-taxes, that's why QuickBooks deducted it from the gross pay including the other taxes. Then, the difference was multiplied by the garnishment since it was set up to calculate based on net pay.

 

Since you only want the garnishment to be multiplied by the difference of the gross pay and the other taxes, you need to change the calculation of this item based on quantity instead.

 

Here's how:

 

1. Click the Lists menu at the top to go to the Payroll Item List.
2. Locate the garnishment item and double-click to edit.
3. Hit Next until the Calculate based on quantity section, then choose the Calculate this item based on quantity option.

400.PNG
4. Select Next again and pick net pay.
5. Once done, choose Next again, then Finish.

 

By doing this, you need to manually deduct the taxes from the gross pay and enter the result on the Quantity column on the paycheck. Here's a sample screenshot from the test account.

 

401.PNG

 

 

I can see how having QuickBooks calculate these payroll items based on you presented would be helpful for you and your business. Since this isn't currently an option, rest assured that I'm making it my top priority that your feedback reaches our Product Development Team. They're constantly looking for great ideas from users, like yourself, when deciding how to enhance the program.

 

Please know that I'm only a post away if you have any other issues or concerns. I'm more than willing to help. Have a nice day!

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