Payroll 101: Involuntary Deductions

Unpaid Taxes

The IRS may issue a tax levy against your wages to collect unpaid taxes. The amount of the taxes owed may be deducted, as well as penalty and interest charges. Payment may be deducted from a single paycheck or distributed over several paychecks, depending on the amount. This deduction will not affect any current taxes deducted from each paycheck. Once the amount owed has been paid, including penalties and interest, the IRS will send written notice to the University. This is the process for both State and Federal tax levies.

Form 668-W, Notice of Levy on Wages, Salary and Other Income,  is provided to your employer to order deductions to satisfy an unpaid tax amount.  There are six parts to this form. The following list should help you understand how to complete the form.

  • Part 1: The employer's copy.  Notifies the employer of the levy amount (the total taxes you owe), the need to deduct this amount from your wages, and where to send the money.
  • Part 2:Your copy of the notice.  Keep it for your records.
  • Parts 3-5: Information about your income tax filing status (single, married filing jointly, etc.) and any dependents you claim as personal exemptions.  This information will go to your employer and to the IRS.  Your employer will  determine the amount of your take-home pay that is exempt from the tax levy.
    • Return Parts 3 and 4 to your employer within three days of receiving the 668-W form from the IRS. If you don't return the completed pages, the IRS will determine how much to deduct from each paycheck.
    • Part 3 is sent to the IRS and Part 4 is retained by the employer.
  • Part 5: Your copy of the tax filing status and personal exemptions information you provided to your employer, keep this for your records.
  • Part 6: The IRS' copy.

Based on the tax filing status and the number of personal exemptions you claim on Form 668-W, your employer determines the amount of your income that is exempt from the tax levy.  This exempt amount is paid to you.  The remaining amount of your take-home pay is sent to the IRS to pay-off your outstanding tax bill.

Child Support Withholding Orders

When a court or agency order is issued for you to pay child support, your earnings are subject to immediate and automatic withholding by your employer. State child support agencies may issue an order if you are late in the agreed upon payments, in this case, you do not have to be notified before a withholding order is sent to your employer. The agency is only required to notify you after the order has been issued. In addition, the employer must also comply with a child support withholding order received from another state.The deductions will continue until the employer receives written notice from the court or agency to stop the withholding. It is your responsibility to have an order issued to stop the withholding when you are no longer required to pay child support.

Creditor Garnishments

A creditor, someone that you owe a debt, may request a court order for monies to be deducted from your paycheck to satisfy the amount owed. If your employer receives an order from the court explaining the reason, the total debt owed and amount to be deducted from your paycheck. You should be given a copy of this order prior to the deductions beginning, the deduction will continue until the entire debt is paid.

Bankruptcy Orders

A bankruptcy trustee will arrange for payment of your creditors when you are declared bankrupt, either voluntarily or by a court. This trustee may send an order to your employer to withhold monies from you paycheck to pay your debts. The trustee may also arrange for payment of other debts represented by existing involuntary deductions.

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