For Garnishments, the law says that the employee must be paid a minimum of $7.25*30hrs*weeks-in-the-payroll. So for us it is $7.25*30*2=$435 has to be their minimum net payment before any garnishment amount can be taken out. So my understanding is that garnishments can deduct up to 25% of the paycheck as long as the total garnished amount never makes the paycheck drop below $435 net disposable income. When I set up the garnishment in QBO with the following settings: Total Amount Owed: $959.05Caculated as: Percent of disposable incomePercent per paycheck: 25.00%Alternate Garnishment cap (optional): $959.05 It is still deducting the paycheck's net balance below $435. For example, for aGross paycheck of $523.25,the Employee's net paycheck without garnishment would be $467.28.So this means that it should garnish $467.28 - $435net-minimum = $32.28garnished This would still leave $435 to the employee as legally required. However, when I add the garnishment on there, QBO is trying to Garnish $113.26, causing the net amount paid to the Employee to be $354.02...which is way below the $435 minimum required by law. How do I fix this to garnish correctly? Why isn't QBO set up to garnish correctly automatically? Do I have to switch to Flat amounts instead of a percentage and manually calculate and deduct exact garnishment amounts for each employee every single payroll? That is not sustainable. Please tell me there is a way to correct this to run automatically from now on. Or am I misunderstanding the garnishment laws and employees aren't entitled to the $7.25*30*number_of_weeks as a minimum? I read the QB Articles on garnishments but they didn't address this question of why QBO is trying to deduct more than legally allowed.

Hello there, @ProfessionalChoiceSolutions. Thanks for sharing detailed information about the payroll calculation of one of your employee's deduction items in QuickBooks Online. You can set up a garnishment item to track the payment if you're payroll service is active in QuickBooks. Doing this will offset the amount every time you run payroll. Here's how to set up the item:Go to the Payroll menu, then Employees.Choose the employee's name.Select edit ✎ beside Pay.Choose edit ✎ to add a deduction.On the drop-down, select Garnishment and Garnishment Type.Enter the description, amount requested, and the maximum percent of disposable income.Click OK once done.Just make sure to check your payroll preferences so payroll liabilities and expenses are set up correctly. Please browse this link for instructions: Set up Payroll account preferences. For future reference, visit the Manually enter payroll paychecks in QuickBooks Online article. It contains additional information about entering payroll paychecks manually via journal entry. Keep me posted if you need additional information about recording the garnishment payment. I'll be right here to help you.

P

ProfessionalChoiceSolutions

Question

Garnishments aren't leaving the minimum $435 net in paychecks

Forum|Forum|4 years ago
November 23, 2021
1 reply
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For Garnishments, the law says that the employee must be paid a minimum of $7.25*30hrs*weeks-in-the-payroll.

So for us it is $7.25*30*2=$435 has to be their minimum net payment before any garnishment amount can be taken out.

So my understanding is that garnishments can deduct up to 25% of the paycheck as long as the total garnished amount never makes the paycheck drop below $435 net disposable income.

When I set up the garnishment in QBO with the following settings:

Total Amount Owed: $959.05
Caculated as: Percent of disposable income
Percent per paycheck: 25.00%
Alternate Garnishment cap (optional): $959.05

It is still deducting the paycheck's net balance below $435.

For example, for a

Gross paycheck of $523.25,
the Employee's net paycheck without garnishment would be $467.28.
So this means that it should garnish $467.28 - $435net-minimum = $32.28garnished
This would still leave $435 to the employee as legally required.

However, when I add the garnishment on there, QBO is trying to Garnish $113.26, causing the net amount paid to the Employee to be $354.02...which is way below the $435 minimum required by law.

How do I fix this to garnish correctly? Why isn't QBO set up to garnish correctly automatically? Do I have to switch to Flat amounts instead of a percentage and manually calculate and deduct exact garnishment amounts for each employee every single payroll? That is not sustainable. Please tell me there is a way to correct this to run automatically from now on. Or am I misunderstanding the garnishment laws and employees aren't entitled to the $7.25*30*number_of_weeks as a minimum?

I read the QB Articles on garnishments but they didn't address this question of why QBO is trying to deduct more than legally allowed.

QuickBooks Online

L

LollyNino_C

Hello there, @ProfessionalChoiceSolutions.

Thanks for sharing detailed information about the payroll calculation of one of your employee's deduction items in QuickBooks Online.

You can set up a garnishment item to track the payment if you're payroll service is active in QuickBooks. Doing this will offset the amount every time you run payroll.

Here's how to set up the item:

Go to the Payroll menu, then Employees.
Choose the employee's name.
Select edit ✎ beside Pay.
Choose edit ✎ to add a deduction.
On the drop-down, select Garnishment and Garnishment Type.
Enter the description, amount requested, and the maximum percent of disposable income.
Click OK once done.

Just make sure to check your payroll preferences so payroll liabilities and expenses are set up correctly. Please browse this link for instructions: Set up Payroll account preferences.

For future reference, visit the Manually enter payroll paychecks in QuickBooks Online article. It contains additional information about entering payroll paychecks manually via journal entry.

Keep me posted if you need additional information about recording the garnishment payment. I'll be right here to help you.

P

ProfessionalChoiceSolutionsAuthor

Thank you for the reply, however, when I follow these instructions it does not fix the problem I am having.

I have already set up payroll, and I can set up a garnishment with those instructions.

The problem, as I stated above, is that I am not not legally allowed to garnish an employee's net pay to be less than $7.25*30*2=$435, but when I set up a garnishment in QBO, it is ignoring that and taking 25% of the paycheck even if that amount brings the employee below $435 for their net pay. It is my understanding that this is illegal.

Under federal law, the garnishment amount can’t be more than 25% of your disposable income NOR the amount by which your take-home exceeds 30 times the federal minimum wage (currently set to $7.25/hour), whichever is less. Quickbooks is only calculating the 25% limit without considering whether they are taking the paycheck below the federal mandate that the net pay must be AT LEAST $217.50 per week minimum. So a 2 week paycheck must always be at least $335, and garnishments can only be deducted on any amount ABOVE that limit. But QBO garnishments are deducting from paychecks to be less than this number.

So again, is there any way to fix this so garnishments are not dropping the employee's net paycheck below the legally mandated minimum?

If not, it seems like a big bug...QBO may be causing millions of employers to accidentally break federal law unknowingly and it should be fixed ASAP. I have just been assuming QB's garnishment calculations took that into account already, but noticed that the garnishments are actually trying to bring the employee's paycheck down into the three-hundreds instead of at least $435.

AlexV

Hello ProfessionalChoiceSolutions!

I understand that you want QuickBooks Online Payroll to automatically calculate the correct garnishment amount per paycheck. I'm here to help you in fixing this and explain how this is calculated.

QuickBooks Online allows you to choose either a flat amount or a percentage of the disposable income. You can take no more than 25% of your disposable income or the amount that the income exceeds 30 times the federal minimum wage, whichever is less.

The disposable income is the total amount after deducting the federal and any exempt deductions. If the disposable income is $435, that means you can deduct an additional at most 25% for the garnishment.

For example, if the employee’s gross earnings in a particular week are $300, and the disposable income is $250, then you can garnish $32.50. This is because only the amount over $217.50 may be garnished.

In your example, the $435 should not be the minimum net amount but the minimum disposable income that you can garnish.

You'll want to read these articles to learn more about how QuickBooks Online Payroll handles garnishment:

Although you still have the option to edit the garnishment amount when you run the payroll if you want to change it. Follow these steps:

From the Run Payroll page, enter the details such as hours worked. Then, click Preview payroll.
On the Review and Submit page, click the Edit (Pencil) icon next to the net pay amount.
Under the Employee deductions section, edit the garnishment amount.
Tap OK, then Submit Payroll.

I also added this link if you need a guide in running payroll reports: Run payroll reports.

Leave a comment if you have additional clarifications about garnishments, deductions, or contributions. I'll help you!

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