U.S. garnishment calculations

Calculate U.S. garnishments, Payroll:

  1. Finds the garnishment rule. How does Payroll decide which Garnishment Rule to Use for each Garnishment?
  2. Calculates disposable income using the following logic:

    Gross Pay - (Withholdings + Excluded Pay + Excluded Deductions)

  3. Calculates the wages exempt from garnishment (protected income) based on the formula assigned to the garnishment rule.
  4. Calculates the amount available for garnishment by subtracting from disposable income the wages exempt from garnishment.

    If the application has already calculated another garnishment for the employee, it is also deducted in this step of the calculation using the following logic: Disposable Income - (Exempt Wage Amount + Calculated Garnishments)

  5. Calculates the garnishment deduction amount (this includes one-time deductions that are not refunds) using the calculation type defined on the garnishment deduction.
  6. Subtracts garnishment, court-ordered arrears, and fees deduction amounts from the amount available for garnishment (in that order). The application calculates the garnishment amount based on the arrears option defined for the deduction code.

    If the multiple garnishment rule applies, the garnishment is calculated based on the multiple garnishment rule.

    If partial amounts are withheld for garnishments, the application will follow the arrears value defined in Deduction (PR05.1) for creating one-time deductions for the remaining balance.

Example U.S.

Caroline Williams has a child support garnishment for $300.00. She does not have a second family. Her gross pay is $3,000.00 with $1,000.00 in withholdings.

A garnishment rule is defined for child support in the state of Virginia. It specifies the Garnishment Wage Exemption Formula as 1 (disposable income multiplied by percent) with 40% for those without a second family.

The child support deduction code is defined as a flat amount. The arrears option is Net to Zero - Yes.

The following steps show how the garnishment is calculated:

  1. The application finds a garnishment rule for the Governing Tax Authority Virginia, Category S (Support), and Type CSUP (Child Support).

  2. Disposable income = 2,000.00

    Gross Wages Less Taxes + Excluded Pay + Excluded Deductions Equals Disposable Income
    3,000 - 1,000 = 2,000

  3. Exempt Wage Amount = 800.00

    Disposable Income Multiplied by Percent dictated by Formula 1 Equals Exempt Wages
    2,000 *.40 = 800
    Note: If a previous garnishment was calculated for Caroline, that garnishment amount would also be subtracted in step 4.

  4. Amount Available = 1,200.00

    Disposable Income Less Exempt Wages Equals Amount Available
    2,000 - 800 = 1,200

  5. Garnishment Deduction Amount = flat amount of 300, therefore

    Garnishment Amount = 300.00

The amount remaining is positive (1,200.00 - 300.00 = 900.00), so the garnishment is paid in full. Any court ordered arrears and additional fees are deducted from the remaining 900.00.