My wife got paid yesterday, she had a problem auto depositing the money in the bank, (I don't think due to this) but anyhow while looking at her pay stub a new category in deductions had been added, looking back this has been since mid May. There are significant wage garnishment deductions every other week. She called her employer and it ends up that the garnishment was for another employee but they mistakenly put it on my wife. They want to add the money to her next paycheck, I told them no because she already paid taxes on the money once, if they add to her paycheck she will pay taxes on the same funds again. Am I thinking correctly? Also will this effect our credit score? Really doesn't matter because we buy everything with cash now but I still don't want that on the score. Our credit score is very good, my broker says the best he has ever seen, I'd hate to screw this up due to the morons at my wife's employer.

You need to see if the deductions were pre or post tax.

If they came out before taxes were applied you actually had a reduced tax liability on the total paid, similar to a 401K pre-tax deduction.

OTOH if it came out post tax then you are correct if they add it to the next check you'd be paying taxes on it twice.

She needs to check the stubs and with HR.

The garnishments I am familiar with are typically deducted after tax is computed. So there would be no tax effect when they return the money to your wife.

quote:

Originally posted by HRK:
OTOH if it came out post tax then you are correct if they add it to the next check you'd be paying taxes on it twice.

You are thinking of this as if it were compensation which it is not. If they deducted the amount from her net pay, then they will add it back to her net pay to make her whole.

Mrs. 08 Cayenne just needs to review her next pay stub to make sure that they coded it as a negative deduction and not as additional wages/salary.

After they refund the amount they took out, the YTD for that particular deduction code should be zero.

This is a God-awful mess for Mrs. 08 Cayenne's employer. I have to believe they have been remitting the money to whomever garnished the other employee's wages. Whomever garnished the wages isn't going to return the money (they have no legal obligation to do so) and good luck getting the money out of the employee with the garnishment before they quit.

If taxes were an issue they should provide it to her as a reimbursement which would not be taxed.

Garnishments are post-tax so just make sure when she is reimbursed her wages and taxes are correct.

If the taxable wages aren't shown on her pay stub it should at least show Medicare tax so you can take the Medicare tax and divide by .0145 as long as she has made less than $200k year to date.

Re: “the garnishment was for another employee but they mistakenly put it on my wife.”

Her employer owes her an apology. At least. And maybe a complementary dinner for two at a nice restaurant.

quote:

Originally posted by Broadside:

quote:

Originally posted by HRK:
OTOH if it came out post tax then you are correct if they add it to the next check you'd be paying taxes on it twice.

You are thinking of this as if it were compensation which it is not. If they deducted the amount from her net pay, then they will add it back to her net pay to make her whole.

Mrs. 08 Cayenne just needs to review her next pay stub to make sure that they coded it as a negative deduction and not as additional wages/salary.

After they refund the amount they took out, the YTD for that particular deduction code should be zero.

This is a God-awful mess for Mrs. 08 Cayenne's employer. I have to believe they have been remitting the money to whomever garnished the other employee's wages. Whomever garnished the wages isn't going to return the money (they have no legal obligation to do so) and good luck getting the money out of the employee with the garnishment before they quit.

Which was my point, she needs to confirm when it was removed, pre or post tax, and if post tax, he is correct she paid the taxes on it when it was income.

The money should be returned in full as a credit or negative deduction as you indicated and post tax. If they add it to her income then calculate taxes again she would pay double taxes on that amount. It would create an even bigger issue for her and the company to straighten out.

The above comments are on target, but let's not forget that the per-paycheck tax deductions are not "paying taxes," they are a loan to the Federal Govt. in anticipation of a tax obligation determined when one's Federal tax return is filed. You don't actually owe taxes until you complete and file your tax return. At that time, any loan you have made to the Feds is credited (without interest) to your tax obligation, an excess is refunded (with no interest paid on the excess), a shortfall is demanded immediately, and interest accrues on any unpaid amount along with a penalty for not having provided enough deductions to ameliorate your obligation. Sounds like a racket, doesn't it?

It is unlikely that you are obligated to pre-pay taxes on the make-up amount, but most payroll software is too stupid to allow for these type of exceptions so, unless a payroll manager does something extraordinary, you should probably expect that a larger-than-usual deduction will appear. It should all work out, and you'll get the excess back after you file your 2023 tax return (assuming that the W-2 you receive is correct for the year).

And, I agree with Pipe Smoker, the company owes your wife a written explanation and a written apology. A copy of these should be placed in her personnel file (since, undoubtedly, the record of garnishment is already there). A bonus for her inconvenience would be the right thing to do. It isn't rude to ask for these things at as high a level of management that you can access.

A garnishment would show up on a credit report, if reported at all. Check your reports over the next month or two.
If it does, open a dispute and it will go away within 30 days.

quote:

Originally posted by architect:
The above comments are on target, but let's not forget that the per-paycheck tax deductions are not "paying taxes," they are a loan to the Federal Govt….

That’s odd.

I don’t recall ever entering into a lender/borrower contract with the government.

No, they just take it.

That’s not a loan.