Page 244 - Essentials of Payroll: Management and Accounting

Payr oll Deductions
Part 6. The IRS keeps this page for its records.
If an employee fails to remit parts 3 and 4 of Form 668-W to the
employer, the employer is required to calculate the employee’s exempt
amount of wages under the assumption that the person is married, filing
separately, with one exemption. These assumptions result in the smallest

possible amount of exempt wages, so employees should be strongly
encouraged to turn in parts 3 and 4 in order to avoid having the maxi-
mum amount withheld from their pay.
When a Form 668-W order is received to garnish an employee’s
wages, the payroll staff must first determine if any wages are not subject
to the order. Only 15 percent of the following types of wages are sub-
ject to a tax payment order issued by the IRS, and they are completely
exempt from an unpaid tax order issued by a state government:
• Armed forces disability benefits
• Pension and annuity payments as specified under the Railroad

Retirement Act
• Unemployment compensation benefits
• Welfare and supplemental Social Security payments

• Workers’ compensation benefits

Once these types of wages have been accounted for,the payroll staff
must determine which deductions can be made from an affected employ-
ee’s pay before determining the amount of the tax levy. Allowable
deductions include:
• Federal and state income taxes
• Social Security and Medicare taxes

• Increases in deductions over which an employee has no con-
trol, such as a medical insurance increase imposed by a health
care provider
• Deductions required in order to be employed by the company

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