Garnishment payable definition
/What is a Garnishment Payable?
A garnishment payable is the amount that a business owes to the applicable court or other agency that has required funds to be withheld from an employee's paycheck. Garnishments may be associated with unpaid taxes, unpaid loans, child support, spousal support, and similar matters. These amounts should be recorded within a separate garnishment payable liability account, so that the accounting staff can more closely track the status of these payments.
Example of a Garnishment Payable
As an example of a garnishment payable, John Smith is in arrears on making child support payments. A court issues an order requiring his employer to deduct $500 from his biweekly paycheck for child support. The employer calculates John’s gross wages and determines the garnishment amount based on the court order and applicable wage garnishment laws (e.g., federal limits on disposable income). The employer then records the $500 as a garnishment payable in its accounting system. This represents the liability to remit the deducted amount to the child support agency. Once the payment is made, the garnishment payable account is reduced by $500.
Accounting for Garnishments Payable
A garnishment transaction is not an expense. Instead, it is a deduction from an employee’s pay, which the employer forwards to the requesting party (such as a court). While the employer is holding the garnished funds, it is acting as an agent for the requesting party.