10.3 Payroll, Employment Taxes & Garnishments
Key Takeaways
- Form 941 reports federal income tax withheld plus employee and employer Social Security and Medicare for the quarter and is due the last day of the month after the quarter; depositing through EFTPS is not the same as filing 941.
- Employer FICA is 6.2% Social Security (up to the Circular E 2025 wage base) plus 1.45% Medicare on all wages; Additional Medicare tax of 0.9% over $200,000 is employee-only.
- Garnishment hierarchy: child support already in force generally precedes a later IRS levy; an IRS Form 668-W levy that was served first precedes later support; federal student-loan administrative wage garnishment and ordinary creditor garnishments follow.
- Ordinary creditor garnishments are capped by the CCPA at the lesser of 25% of disposable earnings or the excess of disposable earnings over 30 times the federal FLSA minimum wage ($7.25 × 30 = $217.50 per week).
- Florida's head-of-family wage protection (F.S. 222.11) can block many ordinary creditor garnishments; it does not block child support or a federal tax levy.
10.3 Payroll, Employment Taxes & Garnishments
Area D's payroll item is accounting, state and federal tax, mathematics, and employment/labor laws, including the leftover hierarchy of garnishments. Circular E 2025 (IRS Publication 15, Employer's Tax Guide) in the Contractors Manual 2025 is the federal employment-tax book. Florida adds reemployment tax, Chapter 440 workers' compensation (coverage, not a payroll-tax return), and F.S. 222.11 wage protection. Hiring forms, I-9s, and discrimination rules are Chapter 11. This section is the paycheck.
The qualifying agent who treats payroll as the bookkeeper's hobby still signs the 941 and still owns financial responsibility under F.S. 489.1195 unless an FRO is appointed. Unpaid 941 deposits become federal tax liens. Those liens are how a 660 credit file turns into a 61G4 problem.
From W-4 to the payroll register
Each new employee completes Form W-4 (federal withholding). Florida has no state income-tax withholding, so there is no Florida W-4 analog. Run a payroll register: employee, regular hours, overtime hours, gross, each deduction, employer burden, net, and check or ACH number. Gross is wages before deductions. Net is what hits the employee's account.
Federal Insurance Contributions Act (FICA):
- Social Security 6.2% employee + 6.2% employer, up to the wage base printed in Circular E 2025 (look the figure up in the book in your locker; do not argue last year's number from memory)
- Medicare 1.45% employee + 1.45% employer on all covered wages (no cap)
- Combined 7.65% each side on wages under the Social Security base
- Additional Medicare tax 0.9% on employee wages over $200,000 (single) — employee-only, no employer match; still reported on Form 941
Federal income tax withheld uses Circular E's wage-bracket or percentage method and the W-4. FUTA (employer-only) and Florida reemployment tax (employer-only) follow section 10.1: $7,000 wage bases, Form 940 annually, Form RT-6 quarterly.
Worked example — weekly payroll, one installer. Regular 40 hours at $28.00 = $1,120 gross. Circular E withholding for this example is $95 (the exam will give the table amount or the dollar figure). Wages under the Social Security base. Still inside the $7,000 unemployment bases. New-employer reemployment 2.7%. Full FUTA credit 0.6%.
- Employee Social Security = 0.062 × 1,120 = $69.44
- Employee Medicare = 0.0145 × 1,120 = $16.24
- FIT withheld = $95.00
- Employee deductions = 69.44 + 16.24 + 95.00 = $180.68
- Net pay = 1,120.00 − 180.68 = $939.32
Employer cost of that check before workers' compensation and benefits:
- Gross wages $1,120.00
- Employer FICA $69.44 + $16.24 = $85.68
- FUTA 0.006 × 1,120 = $6.72
- SUTA 0.027 × 1,120 = $30.24
- Employer payroll taxes = $122.64
- Cash leaving the shop ≈ $939.32 to the employee + $180.68 employee taxes deposited + $122.64 employer taxes = $1,242.64, plus WC
That $1,242.64 is why section 10.2 burdens labor instead of costing $28.00 an hour. Deposit the withheld FIT and both shares of FICA on the Circular E schedule (monthly, semiweekly, or next-day $100,000). Form 941 quarterly reconciles those deposits; it is not the deposit. File 941 by April 30, July 31, October 31, and January 31. Form 940 annually for FUTA. RT-6 quarterly for Florida reemployment. W-2 / W-3 by January 31.
FLSA: nonexempt technicians get overtime at 1.5× after 40 hours in the workweek. A salary plus a van does not make a helper exempt. Misclassified 1099 helpers who fail Circular E's behavioral-control, financial-control, and relationship tests are employees, and the back taxes follow the qualifier. Florida construction workers' compensation (Chapter 440 / F.S. 440.10) is stricter still: parking construction helpers outside coverage with a 1099 is how audits and stop-work orders start.
Garnishments: hierarchy and math
A garnishment is a legal withholding from wages to pay a debt. The employer who ignores a valid order can become liable for the amount that should have been withheld. Enter it in the payroll register as a deduction and remit to the right place: the Florida State Disbursement Unit for support, the IRS for a levy, the court or creditor for a writ.
Disposable earnings under the federal Consumer Credit Protection Act (CCPA) = gross minus legally required deductions. In Florida that is typically federal income tax, Social Security, and Medicare. Health insurance the employee elected, a tool account, and a 401(k) deferral are generally not legally required, so they do not shrink disposable earnings for the CCPA test. Florida has no state income tax to subtract.
Hierarchy the B&F exam expects, combining Circular E with the CCPA. When two orders compete:
| Priority | Type | What limits it |
|---|---|---|
| 1 | Child support / family support (income deduction order) | CCPA: up to 50% of disposable earnings if the employee is supporting another spouse or child, 60% if not, plus 5% if 12 or more weeks in arrears (55% / 65%) |
| 2 | Federal tax levy (IRS Form 668-W) | Circular E / Publication 1494 exemption tables by filing status and dependents — not the CCPA 25% cap |
| 3 | State tax levy | State process; Florida has no wage-withholding income tax, but other tax warrants can still appear |
| 4 | Federal student-loan administrative wage garnishment | Generally up to 15% of disposable earnings |
| 5 | Ordinary creditor garnishments (credit cards, medical bills, supplier judgments) | CCPA Title III: the lesser of 25% of disposable earnings or the amount by which disposable earnings exceed 30 × federal FLSA minimum wage |
Circular E timing rule that trips contractors: if child-support withholding is already in force when an IRS levy arrives, support takes priority. If the levy was served first, the levy takes priority over a later support order. Do not assume IRS always wins, and do not assume support always wins — read which paper was served first.
Florida F.S. 222.11 (head-of-family wage exemption) protects wages from many ordinary creditor garnishments when the employee provides more than one-half of the support for a child or other dependent and meets the statute. It does not block child support or a federal tax levy. Do not tell a technician that Florida does not allow garnishments.
Worked CCPA example — gross $1,200, legally required deductions $250, disposable $950. One ordinary creditor. Employee is not a head of family.
- 25% of $950 = $237.50
- 30 × $7.25 federal FLSA minimum wage = $217.50 per week; excess = 950 − 217.50 = $732.50
- Withhold the lesser = $237.50
Worked stacking example — same $950 disposable. A child-support income deduction order for $300 per week is already on file (31.6% of disposable, under the 50% cap of $475). An IRS levy arrives later. Support keeps the $300. The levy then applies to remaining wages using the Form 668-W exemption, not 25% of the original $950. A credit-card writ that arrives third gets nothing this week if support plus levy have already exhausted the allowable wages.
Never split the check equally among creditors. Never compute disposable earnings after a 401(k) deduction. Never treat an IRS levy as if it were a 25% creditor garnishment. Never recast the technician as a 1099 to dodge an order — that is Circular E fraud and a garnishment violation.
Employment-law edges that hit the paycheck
Final wages are still wages: withhold FICA and FIT, match FICA, and report them on 941 and the W-2. Taxable spiffs and bonuses are supplemental wages; they still hit 941. Levies and support continue until released in writing. Keep levy papers, support orders, and the payroll register at least four years with the 941 file (Circular E record-keeping). A terminated employee still gets a W-2 showing the year's wages and withholding, including weeks that had garnishments.
Florida HVAC scenario
A Class A shop in Duval County has a senior tech at $1,400 gross this week. Disposable after FIT and FICA is $1,120. A child-support income deduction order for $400 is already on file (35.7% of disposable, under the 50% cap of $560). Friday an IRS Form 668-W arrives. Do not pay the IRS first. Support stays first because it was already being withheld; compute the levy on what Circular E leaves after that support and after the levy's exemption table. A supply-house judgment garnishment in the same week's mail is last and may be $0 this week. Code the support and levy as deductions, deposit 941 taxes on the full gross, and leave the technician a W-2 employee. The hierarchy is the exam. The math is the exam. Pretending Florida wages cannot be touched is a miss.
A Florida HVAC employer is already withholding on a child-support income deduction order. An IRS Form 668-W levy arrives next, then a credit-card garnishment. Which withholding order is correct?
Which taxes does Form 941 report, and when is the return due?
An HVAC technician's weekly gross is $1,200. Legally required deductions (federal income tax, Social Security, and Medicare) total $250, leaving $950 of disposable earnings. A single ordinary creditor garnishment arrives. The employee is not a head of family. What is the maximum CCPA withholding this week?