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How do Garnishments work?

Understanding Garnishments and how to manage them using GoCo embedded payroll

Garnishments are a critical part of payroll processing, and as an administrator, you'll need to ensure that your business complies with legal requirements. Garnishments occur when a court or government agency requires a portion of an employee's earnings to be withheld to satisfy a legal debt, like child support, alimony, taxes, or other court-ordered obligations.

Here's a breakdown of what garnishments mean for you as an administrator and how it impacts your payroll system and data management.

Types of Garnishments

There are several types of garnishments that may affect your payroll processes:

  • Wage Garnishments: This is when a portion of an employee's paycheck is deducted to satisfy a debt. It's commonly used for child support, alimony, tax debts, and other court-ordered judgments.
  • Tax Levies: This happens when a government agency, such as the IRS, directs you to withhold a portion of an employee's earnings to settle unpaid taxes.

  • Student Loan Garnishments: If an employee defaults on a student loan, a garnishment order can be issued to recover the debt.

Responsibilities of HR/ Payroll Administrators

As an administrator handling payroll, you have specific responsibilities when it comes to garnishments:

  • Compliance with Legal Orders: You must comply with the garnishment order and begin withholding the specified amount from the employee's paycheck. Failure to comply can lead to penalties for the business.
  • Accuracy and Consistency: Ensure that the correct amount is deducted from each paycheck, and that these deductions are consistent with the order's instructions.
  • Confidentiality: Garnishments are sensitive information. You must handle employee data confidentially and ensure that only authorized personnel have access to garnishment-related information.
  • Recordkeeping: Keep accurate records of all garnishments, including copies of court orders, amounts deducted, and dates of garnishment. These records may be needed for audits or legal compliance.
  • Communication with Employees: Although employees are typically informed about garnishments before they reach you, it's helpful to have a communication plan to address any questions or concerns employees may have.

How Garnishments Affect Our Embedded Payroll System

For Garnishments, you won't see these inside GoCo, but you can see them on the preview page just before you submit payroll. This is because the preview page generates after connecting with Gusto, where the garnishment data is securely stored. 

💡 Best Practice: Always check the payroll preview page before hitting submit to catch all payroll deductions and nuances. You can also export this report for your records and future accounting reference.

If you are needing support in adding or editing garnishments, reach out to our support team at support@goco.io

Understanding Garnishment Handling

While GoCo Embedded Payroll (powered by Gusto) automates certain deductions by remitting funds directly to the intended recipient, there are deductions where:

  • Track A (Automated Remittance): The amount will be calculated and deducted from the employee's paycheck, debited from the company bank account, and remitted directly to the intended recipient.

  • Track B (Manual Remittance): The amount will be calculated and deducted from the employee's paycheck, but the funds will remain in your business account until you manually remit them to the appropriate recipient.

If you're unsure which deductions are automatically debited and remitted versus those requiring manual remittance, feel free to reach out for clarification.

⚠️ Off-Cycle Payroll Rules

When running an off-cycle payroll, it is important to know how these remittance tracks behave to avoid discrepancies in your internal accounting software.

While your regular scheduled payroll runs utilize Track A (Automated Remittance) for most standard court orders, Gusto will not automatically remit garnishment payments on off-cycle payroll runs. This means that during any off-cycle run, your garnishments automatically default to Track B (Manual Remittance):

  • What Happens: The garnishment amount will still be calculated and deducted from the employee's paycheck as shown in your Payroll Journal. However, the funds will remain in your business bank account.

  • Your Next Step: Because the money is not pulled from your company checking account by Gusto, you must manually log into your agency or court portal to push the payment yourself to ensure compliance.

Frequently Asked Questions (FAQ)

Q: Can GoCo help me reconcile my Chart of Accounts or General Ledger?

A: While we love helping our clients utilize our software, GoCo does not directly manage or reconcile your internal accounting software or chart of accounts. However, we are 100% here to help you understand your payroll charges, report numbers, and when those charges occurred so your accounting team can reconcile smoothly.

Q: Why does my General Ledger show a child support deduction was made, but the money wasn't pulled from my checking account?

A: Check to see if that deduction was part of an off-cycle payroll or an additional earnings run. Because automated third-party remittance does not trigger on off-cycle runs, the money is successfully withheld from the employee's check, but stays in your bank account until you make a manual payment to the state or court agency.

Disclaimer: This article is not to be taken as tax, legal, benefits, financial, or HR advice. Since rules and regulations change over time and can vary by location, consult a lawyer or HR expert for specific guidance.

If you have additional questions please contact support@goco.io