Drake Accounting®: How do I set up wage garnishment?
Wage garnishment is a legal procedure by which an employer is required by court or administrative order to withhold an employee's earnings for the benefit of a creditor. The employer is responsible for compliance with any applicable federal or state restrictions dealing with wage garnishment. What restrictions apply depend on circumstances, including the nature of the debt involved.
You can set up garnishment in Drake Accounting® as a deduction, either a Garnishment coded deduction to meet U. S. Department of Labor (DOL) standards, or an uncoded deduction (code <None>).
- For a Garnishment coded garnishment deduction Drake Accounting® applies DOL advisories describing wage garnishment limits under the Consumer Credit Protection Act (CCOA).
- Note that DOL restrictions applied by a Garnishment coded garnishment may not be appropriate for garnishments for child and/or spousal support, bankruptcy, or actions to recover state or federal taxes. For garnishment that does not follow DOL standards, you may use an uncoded deduction.
- For an uncoded garnishment (code <None>), Drake Accounting® does not consider garnishment law.
- In either case, you or the employer must confirm that the actual garnishment meets legal requirements before running an employee’s garnished pay.
To set up and apply a Garnishment coded wage garnishment that follows DOL guideline restrictions only.
- Set up a Garnishment coded wage garnishment.
- Go to Employees > Deductions & Benefits. Confirm the Deductions tab is selected.
- Click New.
- Enter the Name, Account, and select Percent. The name “Garnishment” is used in this example.
- The Amount should be .00000. The effective percentage will be entered under Employee Setup.
- Ceiling is determined by the software, so this field should be 0.00000 or left blank.
- W2 Box 12 Code does not apply to garnishment of wages. Select <None>.
- Select Garnishment for Withholding Code.
- Some states may require SUTA or local withholding to be calculated before or after the garnishment of wages. Refer to the state or locality of wages to determine if these settings are needed.
- Click Save.
- To add the garnishment to an employee after you have set up the garnishment deduction.
- Go to Employees > Employee Setup, open the desired employee and click the Deductions tab.
- Select the garnishment deduction and click the blue arrow to apply it to the employee.
- Double click the amount and enter the correct percentage (.25 is the maximum amount Drake Accounting® will calculate under DOL guidelines.)
- Click OK and Save.
- Verify the minimum wage.
- Go to Firm > Rates & Withholding Setup > Federal Setup.
- Verify that the minimum wage is entered and that it is correct according to current regulations.
- Click Save.
- Verify correct garnishment of wages under DOL standards after a payroll check has been generated. Use the DOL table to determine if the correct garnishment has been calculated.