Chapter 23:
Garnishments and Withholding Orders

Updated as of May 2008

 

The principal federal law governing wage garnishments is the Consumer Credit Protection Act (15 USC Section 1671). Section 605 of Title VI Public Law 102-164, specifically governs federally insured and guaranteed student loans. California law governing garnishments is found in Section 706 of the California Code of Civil Procedure. All of these set limits for garnishments. Getting organized before you begin processing garnishments is essential.

 


FIRST, IDENTIFY THE SOURCE(S):

 

These can be federal or state agencies, and may include (but are not limited to) civil and criminal judgments from various courts.

 


SECOND, NOTIFY ALL APPROPRIATE PARTIES:

 

Written notification is the preferred manner of notification. However, where time constraints exist, notification can be verbal and should be followed by written notice. If the order has been sent in error and a release was recently secured, any garnishment action on your part may not be necessary. If it is necessary, notify as follows:

 

Employee:

 

Notify employees immediately upon receipt of the order . Withholdings may require commencement as early as the next regular payday for federal taxes. The employee will have time-limited appeal rights, beginning on the date the order was sent. A copy of the order is normally included with the original, and can be given or sent to the employee.

 

Payee (i.e., the entity collecting the garnishment or withholding order):

 

Notify payees within 10 days of receipt of the order. This acknowledges your receipt. Payees may include: local, state and federal courts; district attorneys' offices; the Internal Revenue Service; the Franchise Tax Board; and the United States Department of Education. Statutory penalties may be assessed against you (the employer) for untimely acknowledgements or order executions.

 

Additional Payees:

 

If a previous order is in force when you receive orders from new/additional payees, then you must notify all payees of the priority amongst all other orders within 10 days of date of each new order.

 


THIRD, DETERMINE THE PRIORITY OF THE ORDER:

Single Order priorities

  1. Priority One: A court-ordered wage assignment for support.
  2. Priority Two: A withholding order for child or spousal support.
  3. Priority Three: An Earnings Withholding Order for Taxes (EWOT).
  4. Priority Four: An administrative wage garnishment (student loans), or other earnings withholding orders for other non-tax debt and civil judgments.

Multiple Order priorities

  1. Priority One: Court-ordered wage assignments for support (execute by date of issuance).
  2. Priority Two: Withholding orders for child or spousal support (execute by date of issuance).
  3. Priority Three: Earnings Withholding Orders for Taxes (EWOTs).
    1. If you receive an EWOT and there is a prior court-ordered wage assignment for support or a withholding order for support in force, the EWOT is effective. Notify the tax agency that a higher priority order is in effect and comply with the higher priority order before withholding any amounts as ordered by the EWOT.
    2. If an EWOT is in force and you receive a court-ordered wage assignment for support or a withholding order for support, the EWOT will remain but will move down in priority. Notify the tax agency that a higher priority order has been received and comply with the higher priority order before withholding any amounts as order by the EWOT.
    3. If you receive an EWOT and there is already a prior EWOT in force, the most recently issued EWOT is not effective. Return the subsequent order with this information. If the EWOTs are issued by both federal and state agencies, the order that first comes into existence will take priority. (CA Government Code § 7170.5)
    4. If you receive two EWOTs for the same employee on the same day, honor the EWOT for the tax liability secured by the lien that was issued first. Contact the Tax Agencies that issued the EWOTs to determine the dates the liens were issued. If the liens came into existence on the same date, select which EWOT to honor.
    5. If you receive an EWOT and there is a prior earnings withholding order (fourth priority) in force, the EWOT is effective. Notify the levying officer who served the prior earnings withholding order that a higher priority order has been received and begin honoring the EWOT. The prior earnings withholding order will remain in effect. If the EWOT is satisfied before the prior earnings withholding order expires (100 days after the date the order was received), begin withholding as order by the earnings withholding order again.


FOURTH, DETERMINE THE AMOUNTS TO BE WITHHELD:

A. Support Orders

A total maximum of 60% of disposable earnings may be garnished for all support orders for an individual not supporting another child/spouse - otherwise, up to 50%.

B. Federal Tax Levies

100% of disposable earnings, unless otherwise ordered. The IRS, however, seldom requires the entire amount be withheld. The Internal Revenue Code exempts from the levy the amount equal to the employee's standard deduction, plus personal exemptions allowed for the taxable year, divided by 52. If the employee has failed to provide the IRS sufficient information for the IRS to calculate the correct exemption amount, the exempt wages shall be the standard deduction for a single/married person as appropriate, plus one exemption.

C . State Tax Liens

25% of disposable earnings for any pay period,

OR

the amount by which the disposable earnings of an individual exceed 30 times the federal minimum wage, currently $5.15/hour. (CA Code of Civil Procedure § 706.050)

Notes:

  1. If the amount withheld for the higher priority order equals or exceeds 25% of disposable income, no additional amount should be withheld. However, the EWOT remains in effect. Once the higher priority order is satisfied, begin withholding as ordered by the EWOT.
  2. If the amount withheld for the higher priority order is less than 25% of disposable income, and is not for taxes, withhold an additional amount as ordered by the EWOT. The additional amount should equal 25% of disposable income less the amount withheld for the higher priority order.

D. Student Loans

10% of disposable earnings for any pay period

OR

a greater percentage, up to 25% of disposable earnings for any pay period, when the individual consents in writing to a higher percentage.

E. General/Other

25% of disposable earnings for any pay period,

OR

the amount by which the disposable earnings of an individual exceed 30 times the federal minimum wage, currently $5.15/hour.

 

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