A federal tax levy continues to be deducted from an employee’s wages until the IRS issues Form 668-D, Release of Levy. The maximum creditor garnishment deduction under the CCPA is 25% of the employee’s disposable earnings. Under the CCPA, disposable earnings are defined as gross earnings less deductions required by law. Since 1994, all divorce orders with child support require income withholding unless both parties agree to a different method.
For more information, refer to Module 3, Lesson 1
A true statement regarding an involuntary wage attachment is:
federal tax levies continue until the obligation is released. – Correct Answer
creditor garnishments are limited to 20% of disposable pay by federal law.
a parent must be in arrears before withholding can be ordered for child support.
voluntary deductions are used to calculate the employee’s disposable pay.
Employers have the responsibility to choose the priorities of which type of deduction?
Taxes
Involuntary deductions
Voluntary deductions. – Correct Answer
State deductions required by law
When the total of an employee’s child support deductions from multiple Income Withholding Orders exceeds the maximum deduction allowed by the CCPA or state law, state laws allow: prorating the deduction based on the total of all orders, allocating an equal amount to each order, or satisfying the first order received first.
The answer is (a). Whatever method is easiest for the employer is not a method found in state laws when allocating the amount withheld for multiple child support orders against an employee’s wages.
The other options are all methods that are found in state laws.
- First-in, first-out (FIFO) method: This method prioritizes the first child support order and pays it off first, before any money is allocated to the other orders.
- Equal allocation method: This method allocates an equal amount of money to each child support order.
- Pro rata method: This method allocates the money based on the amount owed on each child support order.
The specific method that is used will vary from state to state. Employers should consult with their legal counsel to determine the specific requirements in their jurisdiction.
For more information, refer to Module 3, Lesson 1
All of the following methods are found in the state laws when allocating the amount withheld for multiple child support orders against an employee’s wages EXCEPT:
whatever method is easiest for the employer – Correct Answer
the first order gets satisfied with any remaining amount allocated to the next order.
an equal amount is deducted for each order.
prorate allocation based on the amount of the orders and amount deducted.
The correct answer is: $1,911.07
Under IRS rules, the employee’s take home pay is the employee’s gross pay less all deductions in effect before the levy was received.
For more information, refer to Module 3, Lesson 1
An employer receives Form 668-W on April 29, 2023. The employee claims married filing jointly with 3 dependents. The employee’s biweekly wages are $2,700.00. Prior to this period, the employee’s deductions for each pay period consisted of: federal income tax $228.00, state income tax $123.00, social security tax $158.58, Medicare tax $37.09, pre-tax health insurance $142.26, and 401(k) plan $100.00. Calculate the employee’s take-home pay.
The Income Withholding Order (IWO) is a standard, OMB-approved federal form. There are very few changes acceptable. An employer can reject an IWO and return it to the sender if the form is altered or contains invalid information.
For more information, refer to Module 3, Lesson 1
All of the following changes to an Income Withholding Order (IWO) are acceptable EXCEPT:
alterations to the format. – Correct Answer
changes to the pagination.
changes to the font.
addition of state–specific information.
Child support orders and tax levies generally have withholding priority over creditor garnishments. Any garnishment already being withheld has priority over a subsequently received federal tax levy.
For more information, refer to Module 3, Lesson 1
An employee’s income is insufficient to deduct all the wage attachments ordered. The attachments were received in the following order: state tax levy, federal tax levy, child support order, and creditor garnishment. Which wage attachment has the LOWEST priority?
Creditor garnishment- Correct Answer
Federal tax levy
State tax levy
Child support payments
Under IRS qualified transportation fringe benefit rules, transit passes, transportation in a commuter highway vehicle, and parking in excess of $300.00 per month are taxable. In addition, the IRS requires advances to be substantiated by the employee for qualified transportation fringe benefits.
For more information, refer to Module 4, Lesson 2
Employers may provide nontaxable qualified transportation fringe benefits for the full amount in which of the following circumstances?
reimbursed substantiated transit passes of $296.00 – Correct Answer
monthly commuter passes valued at $310.00.
parking exceeding $300.00 per month.
employer-provided cash advances for subway passes.
IRC Sec. 132 defines the following nontaxable fringe benefits: no-additional-cost services, qualified employee discounts, de minimis benefits, working condition fringe benefits, qualified transportation fringe benefits, qualified moving expenses (for military personnel only), and qualified retirement planning services. Working condition fringe benefits include subscriptions to a job-related newsletter, cost of a job-related seminar, and the reimbursement of dues to a professional organization. The IRC requires all compensation for services be included in an employee’s income except when specifically excluded by law. There are no exclusions for cash payments, such as back-pay awards, personal use of a company-vehicle, and awards in a company sales contest.
For more information, refer to Module 4, Lesson 3
Which of the following types of compensation is taxable?
Personal use of a company vehicle- Correct Answer
Employer reimbursement for professional organization fees
Subscription to a job-related newsletter
Cost of a job-related seminar
