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Set up and collect garnishments

by Intuit Updated 2 months ago

Learn how to follow wage garnishment orders using QuickBooks Online Payroll and QuickBooks Desktop Payroll.

A garnishment is an order by a court, the federal government, or a state agency, for an employer to withhold wages from an employee's pay and send the money to an agency or creditor. The order might also let you add an administrative fee to the employee.

If you receive a court-ordered wage garnishment order or tax levy for an active employee, you're legally bound to withhold the employee's wages. These orders have specific guidelines that determine the amount you withhold and the way you handle multiple garnishments

Step 1: Determine what type of garnishment you have

The type of garnishment you have will determine how you add it to your QuickBooks.  There are several types of garnishments including:

  • Federal and state tax levies
  • Child or spousal support withholding orders
  • Bankruptcy
  • Federal and state student loans
  • Federal agency debt orders (non-tax)
  • Creditor garnishments

Other names used to refer to a garnishment order include "earnings withholding order," "federal tax levy," "support order," "bankruptcy order," "writ of garnishment," or "garnishment summons."

Step 2: Add the garnishment to QuickBooks

Add a garnishment that is deducted from an employee's disposable income. Follow these steps for your payroll service.

Note: Not sure which payroll service you have? Here's how to find your payroll service.
  1. Go to Payroll, then Employees.
  2. Select your employee.
  3. From Deductions & contributions, select Start or Edit.
  4. Select + Add Garnishment.
  5. In the dropdown menu ▼select the Garnishment Type.
  6. Enter a description. This will show on your reports and pay stubs. It's a good idea to enter both the employee and agency names so that you’ll recognize which agency is owed the garnishment. 
  7. Enter the following fields based on the garnishment type you chose.
    • Child/Spousal Support
      1. Amount Requested - The amount that will be deducted per paycheck. If allowed by the order, include any administrative fees you add. Note that this amount may decrease once disposable earnings are calculated. 
      2. Maximum % of disposable income - Look for this wording:  "The total withheld amount, including your fee, cannot exceed __ % of the employee's/obligor's aggregate disposable weekly earnings…”.
    • Federal Tax Levy
      1. Amount Exempt  - The amount that appears in the table included in the order.
    • Other Garnishment
      1. Total Amount Owed - The total amount owed from the order. The garnishment will automatically stop when the employee's total amount garnished reaches this amount.
      2. Amount per period - Select whether the amount to be garnished is a percentage of gross pay or a fixed dollar amount. Enter the amount as shown on the order.
      3. Alternate Garnishment Cap -. Look for a withholding limit or cap on the order. This cap must include any administrative fees you add. The total amount withheld for the garnishment can't exceed this cap.
  8. Select Save.
  9. If your employee has multiple garnishments, select the dropdown menu ▼ next to Garnishment weighting to select the order in which the garnishments are collected.
  10. Select Done.

Create a payroll item, or multiple if the employee has separate garnishments, to track the garnishment in QuickBooks Desktop.  Then add the new item to the employee profile so it will automatically appear on each paycheck. 

Step 1: Create the garnishment payroll item

  1. Select Lists, then Payroll Item List.
  2. Select the Payroll Item ▼ dropdown, then New.
  3. Select Custom Setup, then Next.
  4. Select Deduction, then Next.
  5. Enter a name for the payroll deduction such as Child Support Smith for employee Bob Smith, and select Next.
  6. Enter the name of the agency to which the liability is paid. If you currently don't know the name of the agency, you can add it later. Select Next.
  7. In Tax Tracking Type ▼dropdown leave None selected. Select Next.
  8. In Taxes select Next.
  9. In Calculate Based on Quantity, make sure Neither is chosen, and select Next
  10. In Gross vs. Net choose Net to calculate amount after taxes. Select Next.
  11. Enter a Default Rate and Limit if there is one. Don't forget to add a percentage sign for a percentage and decimal for a dollar amount. Select Finish.

Step 2: Add the garnishment to the employee

  1. Select Employees, then Employee Center.
  2. Double-click the employee’s name.
  3. Select Payroll Info.
  4. In the section for Additions, Deductions, and Company Contributions, under Item Name, add your new garnishments item.
  5. In the Amount column, enter the amount per paycheck to take out.
  6. Select OK.

Step 3: Pay the garnishment to the appropriate agency

You'll need to make the payments directly to the agencies or creditors as instructed in the garnishment order or tax levy.

For information about how to make the garnishment payment see:

QuickBooks Online Payroll CoreQuickBooks Online Payroll EliteQuickBooks Online Payroll PremiumQuickBooks Payroll AssistedQuickBooks Payroll BasicQuickBooks Payroll EnhancedQuickBooks Payroll Standard

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