If you owe money, your creditor can go to court to obtain a judgment against you. Upon receiving the judgment, the creditor can then file for a wage garnishment, provided your state allows wage garnishments. A legal institution, such as the Internal Revenue Service or a state revenue agency, can garnish wages without a court order. After your employer receives the wage garnishment request, they deduct the instructed amount from your disposable wages.
If you have a garnish imposed on your earnings, money will be taken from your gross income rather than your net income in order to satisfy your debt obligations.
To arrive at your disposable wages, your employer subtracts all legally required deductions from your gross wages for the pay period. Mandatory deductions include federal income tax, Medicare tax, Social Security tax, and, depending on your situation, state and local income tax. State employee retirement systems and unemployment insurance are also deducted. When figuring disposable wages, your employer does not subtract voluntary deductions, such as health and life insurance premiums and regular retirement contributions, from your gross pay. Your net pay is your take-home pay after all deductions, including wage garnishment.
Ordinary Garnishment Amount
After figuring your disposable wages, your employer deducts the garnishment amount. Under federal law, this amount can be no more than the smaller of 25 percent of your disposable wages or the total by which your disposable pay exceeds 30 times the federal minimum hourly wage of $7.25 per hour.. This calculation goes for ordinary wage garnishments, such as those filed by creditors for medical and credit card debts. State law may set a different limit than federal law. In this case, the lower rate applies.
For child support and alimony garnishments, your employer can subtract no more than 50 percent of your disposable wages if you are taking care of a child or spouse that is excluded from the garnishment order. If the child or spouse is included in the order, your employer can deduct up to 60 percent of your disposable wages. If you are more than 12 weeks behind on your support payments, an additional 5 percent can be taken out. State law sets the amount your employer can withhold for state tax levies. For IRS tax levies, your employer must use Publication 1494 to figure the amount of your wages that should be excluded from the levy.
The Case of Multiple Garnishments
Your employer can deduct several garnishments at once from your paychecks, provided the amount does not exceed 25 percent of your disposable wages. If the first garnishment takes up the maximum amount, your employer must wait until the first debt is paid off before withholding any others.
Some states protect a portion of the debtor’s wages from wage garnishment, or restrict the type of income that can be garnished. Child support, alimony, disability, social security and retirement income are typically exempt from garnishment by creditors, but not by the government. To avoid creditors garnishing your exempt property, follow the instructions on the garnishment paperwork to file a claim of exemption with the court. The state may have a head of household exemption, which excludes all of your pay from garnishment if you contribute more than half toward the support of a dependent. An exception applies if you give your written consent to the garnishment.