Garnish Employee Wages with AX 2012

Wage garnishment is a legal procedure in which a person’s earnings are required by court order or other equitable procedures to be withheld by an employer for the payment of a debt such as child support. The employer is required to comply with the law, but the employee is also protected from having excess garnishment deductions from their payroll.

This post will focus on the process of creating a garnishment in Microsoft Dynamics AX 2012, using the example of a Child Support Order, which is generally the highest priority garnishment. This example assumes AX Payroll USA is installed.

We get our assumptions from our company’s legal counsel and directly from the court order:

• The Payroll manager enters the garnishment information into AX 2012 for payroll deductions.
• There can be multiple garnishments, but this one takes priority over the others.
• There will be a $1.50 administrative fee for each processing of the garnishment payable to the state SDU (state disbursement unit).
• The state disposable income definition falls in line with the federal CCPA definition.
• The maximum withholding for this support order is 50%, and with 5% added if the employee falls in arrears by 12 weeks.
• The regular deduction is at 20% of the employee’s disposable income.
• The garnishment will continue until the court sends a notification to stop, ordered by the judge to be at the living child’s 18^th birthday, high school graduation, upon marriage, or joining the military (whichever comes first).

First, let’s create a garnishment template for garnishments, such as child support and court-ordered creditor garnishments. This is the first time our fictional company has entered a garnishment for an employee in AX.

1. Go to Human resources > Setup > Benefits > Benefit elements.
2. With the Types area selected, click New to create the benefit type.

• Name the benefit Type “Garnishment”, and complete the Description field.

• Under Concurrent enrollment, select Multiple enrollments per type. This allows employees’ wages to be garnished for multiple garnishments at once. For example, child support and creditor payments can be added concurrently, though child support takes priority over creditors.

• Under Payroll category, choose Garnishment. This will enable certain settings that apply to Garnishments, in the Plans area.

1. Click Plan to set up the specific collection of parameters that will act as a template for an actual benefit.
   1. Click New.
   2. Name the Plan and Description for “Child SO” and “Child Support Order”.
   3. Select Garnishment as the Type, and select Deduction only from the Payroll impact drop down list.

1. 1. Expand the Tax rule fast tab.
      1. In the Pretax basis field, select None from the drop down list. Garnishments are “post-tax” deductions which apply to “disposable earnings”, as defined the Title III of the Consumer Credit Protection Act.

1. Expand the Payroll details fast tab.
   1. As a best practice in AX, check the Lock pay statement check box; this prevents incorrect garnish amounts due to editing the pay statement line from occurring. This can be left blank as well.

1. 1. Note: deduction method is set to Partial by default, and cannot be changed. Amounts for garnishments that are higher than the maximum Limit amount are placed in arrears.
   2. Check the boxes for Primary, Additional, and Gross up to include this garnishment in primary payment runs, such as regular payroll, and in bonus payments and off-cycle pay runs.

Note: In this example, we include Gross up since the company can issue grossed up bonuses to ensure that the employee gets the amount awarded, regardless of taxes withheld.

1. 1. Enter the Deduction priority, highest being 1 and lowest being 100, for the priority level of the Child support garnishment. The priority of Child support, generally, would be “1”. They would generally be garnished according to the priorities below:
      1. Child support orders
      2. Chapter XIII bankruptcy orders
      3. Federal tax levies
      4. Federal agency garnishments
      5. State tax levies
      6. Local tax levies
      7. Creditor garnishments
      8. Student loan garnishments

1. 1. In the Default contribution limits section, leave the values blank. There is no specific dollar-amount limit to court-ordered child support. Current federal law allows up to 50% of a worker’s disposable earnings if worker is supporting another spouse or child, and 60% if not. An additional 5% can be garnished for over 12 weeks of payments in arrears.

1. Expand the Accounting fast tab.
   1. Select the legal entity to see the accounting information for the selected garnishment and the selected legal entity. This is essentially a filter for the Category and Vendor fields.
   2. Select a Category, and then the Vendor from the category. Or you can just select the garnishment payee from the unfiltered Vendor list.

1. 1. Select the Default financial dimensions that apply to the garnishment payroll postings.
   2. Enter the Main account for employee Deductions.

1. 1. Expand the Reporting fast tab.
      1. According to the IRS, wage garnishment for child support does not need to be reported on an employee’s W-2, so the Reporting fast tab is optional. However, an employer can use Box 14 of the Form W-2, with no special code. To go ahead and add it, click the Maintain versions fast tab.
      2. Click Add to create a new line, and set the Effective date.

1. 1. 1. Under Deductions, select Form W-2 box number 14 and enter the box label.

1. 1. Click Close to return to the Plan.
      1. The Child Support Order Plan has been created:

1. 1. 1. 1. Note: you should make sure to create a Plan record for each garnishment with a different payee, tax treatment, W-2 reporting requirement, deduction priority, and account posting.
   2. Click Options to set up the related garnishment options.
      1. The following option applies to garnishments, since only the worker’s pay is garnished:

We finished our template for the child support order garnishment in the Benefit Elements form. In our follow up post, we will create the specific garnishment record for child support, and assign to an employee. Then we’ll show you the garnishment’s impact on the employee’s payroll.

The post Garnish Employee Wages with AX 2012 appeared first on Arbela Tech.