How to Set Up and Collect Garnishments in QuickBooks

A garnishment is a court order that requires an employer to withhold a portion of an employee’s wages and send the funds to a specified agency or creditor. This article provides a comprehensive guide on how to set up and collect garnishments in QuickBooks Online Payroll and QuickBooks Desktop Payroll.

Key Facts

  1. Set up a garnishment item:
    • Go to the Payroll menu and select 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.
  2. Check payroll preferences:
    • Make sure to check your payroll preferences to ensure that payroll liabilities and expenses are set up correctly.
  3. Record the garnishment payment made outside of QuickBooks:
    • If you’re using another payroll system, you can write a check to reflect the payment made to the taxing authority.
    • Log into your QuickBooks account.
    • Click the Plus sign.
    • Select Check below Vendors.
    • Enter the necessary information.
    • Under Category details, add the expense account.
    • Enter the amount.
    • Hit Save and close.

Step 1: Determine the Type of Garnishment

The type of garnishment you have will determine how you add it to QuickBooks. Common types of garnishments include:

  • Federal and state tax levies
  • Child or spousal support withholding orders
  • Bankruptcy
  • Federal and state student loans
  • Federal agency debt orders (non-tax)
  • Creditor garnishments

Step 2: Add the Garnishment to QuickBooks

QuickBooks Online Payroll

  1. Navigate to Payroll > Employees.
  2. Select the employee’s name.
  3. Under Deductions & Contributions, select Start or Edit.
  4. Click + Add Garnishment.
  5. Select the Garnishment Type from the drop-down menu.
  6. Enter a description, amount requested, and maximum % of disposable income (if applicable).
  7. Select Save.
  8. If the employee has multiple garnishments, select the order in which they should be collected under Garnishment Weighting.

QuickBooks Desktop Payroll

  1. Create a payroll item for each garnishment.
  2. Select Lists > Payroll Item List.
  3. Click Payroll Item > New > Custom Setup > Next.
  4. Select Deduction > Next.
  5. Enter the payroll deduction name and select Next.
  6. Enter the agency name and select Next.
  7. Leave Tax Tracking Type as None and select Next.
  8. Select Net to calculate the amount after taxes and select Next.
  9. Enter the default rate and limit (if applicable) and select Finish.
  10. Add the garnishment item to the employee’s profile under Employees > Employee Center > Payroll Info.

Step 3: Pay the Garnishment

Make payments directly to the agencies or creditors as instructed in the garnishment order or tax levy.

Conclusion

Setting up and collecting garnishments in QuickBooks is essential for complying with court orders and ensuring accurate payroll processing. By following the steps outlined in this article, you can effectively manage garnishments and ensure that the appropriate funds are withheld and distributed.

Sources

FAQs

 

What is a garnishment?

A garnishment is a court order that requires an employer to withhold a portion of an employee’s wages and send the funds to a specified agency or creditor.

 

What types of garnishments can I set up in QuickBooks?

You can set up various types of garnishments in QuickBooks, including federal and state tax levies, child or spousal support withholding orders, bankruptcy, federal and state student loans, federal agency debt orders (non-tax), and creditor garnishments.

 

How do I add a garnishment to QuickBooks Online Payroll?

To add a garnishment to QuickBooks Online Payroll, navigate to Payroll >; Employees, select the employee’s name, click + Add Garnishment under Deductions & Contributions, and enter the necessary details.

 

How do I add a garnishment to QuickBooks Desktop Payroll?

To add a garnishment to QuickBooks Desktop Payroll, create a payroll item for the garnishment under Lists >; Payroll Item List, and then add the item to the employee’s profile under Employees >; Employee Center >; Payroll Info.

 

How do I pay a garnishment?

Make payments directly to the agencies or creditors as instructed in the garnishment order or tax levy.

 

Can I set up multiple garnishments for an employee?

Yes, you can set up multiple garnishments for an employee in both QuickBooks Online Payroll and QuickBooks Desktop Payroll.

 

How do I handle garnishments that exceed an employee’s disposable income?

If a garnishment exceeds an employee’s disposable income, you should contact the agency or creditor to determine how to proceed.

 

What if I receive a garnishment order for an employee who is no longer employed?

You should contact the agency or creditor to inform them that the employee is no longer employed and provide them with the employee’s last known address.

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