garnishment income

Hello Lyndaj,

I want to ensure that you record the vendor's garnishment correctly.

When entering the garnishment payments in QuickBooks Desktop for the company that obtained a judgment against a vendor, you'll need to set up an account dedicated to tracking the base amount of the garnishment and a separate account for the interest due.

Alternatively, you can create a Check or Bill to enter the total amount including the principal, court costs, and the interest allowed by the court. This approach simplifies the entry by combining all components of the judgment into a single transaction. Then, you can create a Check to pay your vendor. Below are the steps to do so.

1. Click the Banking menu.
2. Select Write Checks.
3. Select the BANK ACCOUNT, then choose the vendor on the PAY TO THE ORDER OF field.
4. Go to the Expenses tab.
5. Fill in the necessary details.
6. Click Save & Close.

With regard to the procedures for setting them up and determining the most appropriate method for accurately reflecting the garnishment payments in the company's books, I suggest reaching out to your accountant.

Moreover, you can check this article if you need help in printing checks: Print checks.

I'm always around whenever you have concerns about recording transactions.

I think maybe I didn't explain it correctly; but your information does help.  I just need clarification.  This is a condominium regime (TC).  They hired a roofer who did not do the work he said he did.  TC obtained a judgment against him.  He now went to work for a company (PBI) so he gets a regular paycheck.  PBI is collecting the garnishment and sending it to TC.  If I set up an asset account (maybe Judgement Receivable) just for the base amount and then a separate asset account (maybe interest receivable), then wouldn't I just post the checks received against the Judgement receivable account?  Why would i need to write a check?

Thank you.

Hello there, @lyndaj. Thanks for the additional information. I'm here to provide clarification. 

Yes, you're correct. If you set up an account just for the base amount, you can post the checks received against the receivable account. 

On the other hand, to ensure the accuracy of your books, an accountant can provide personalized advice based on your specific circumstances, ensuring that the garnishment payment is correctly accounted for and recorded in the appropriate accounts.

If you don't have one, you can use our Find-an-Accountant tool to look for an expert near you.

Furthermore, by writing a check, you create a transparent and traceable payment record, which helps maintain accurate financial records and ensures compliance with accounting standards.

I've also added this article for future reference: How to use QuickBooks to pay payroll taxes and other liabilities.

I'm here to lend a hand if you need any more help setting up garnishment income in QuickBooks. Don't hesitate to get in touch.

@lyndaj 

Ignore the posts from QB employees in this case.  Their responses are unhelpful as you're aware.  The posts may be AI-generated.

Here's my $.02.  If you record a Judgement Receivable asset, you will need to record a corresponding Settlement Gain (other income).  To do that create a journal entry - debit receivable, credit gain.  Then, when you receive the payments from PBI, you will assign the principal portion to the Judgement Receivable asset account and the interest portion to Interest Income (other income).  This is solely for financial reporting purposes.  The tax treatment should be handled by your CPA/tax accountant.  It's not a bad idea to check with your CPA at this point because I'm not 100% sure that you even need to record this since the gain is contingent on the roofer being able to earn wages that can be garnished.  If that's the case, there would be nothing to record at this point and you would record the gain and the interest income as each payment is received.