Wage Garnishment to Re-pay Unemployment Income Over Payment in MN

[LuvMySibe]

Hello,
I received a noticed through my employer from the state of MN that my wages will be garnished due to an over payment made in unemployment income in 2008. The instructions on the Administrative Garnishment of Earnings Disclosure & Worksheet states, "See instructions on the enclosed form on how to complete the Administrative Garnishment Earnings Disclosure & Worksheet." I am a bit confused. The form seems straight forward, but it reads as if there are instructions that I do not see. I searched the internet to see if I could find them (kind of like searching for a tax form), but I couldn't find anything. I did come across some information about what defines "disposable earnings." The form states that it is gross earnings minus deductions. I found on the internet where some of the deductions from my earnings could not be deducted ... like medical and dental insurance. Does anyone know where I can find this information? And, where does FSA fit into the disposable earnings equation? ~Thanks

[LuvMySibe]

Sorry. I forgot one question. Where will this garnishment fit into my taxes at the end of the year? If I remember, taxes were not with-held from the unemployment payments in 2008. Is this garnishment still considered taxable income? Thank you

[tyson24]

I think it depends. A certain amount was exempted last year from taxes ($2400 I think). The tax thing I cannot answer.

Do you have a property tax rebate coming back this year? If so, the Dept of Revenue will yank it right out of your rebate. How do i know this? I just got mine the other day with $398 missing for a school debt that I was making installment pmts on but they want their money now

If I can ask, how did you get overpaid?

[LuvMySibe]

I was overpaid because I calculated bonuses from my company as part of my income when I was completing the form for unemployment. Come to find out the company had not classified the bonus as wages. They classified it as non-labor expense. It was money paid to me for generating sales leads. The state would not have found out if the company had not been investigated for "bad" business practices. So, the company screwed me again.

I am well aware of the state keeping any tax refund (of any kind ... property or income) to apply to the debt. They have kept my income tax refund for the past two years. I always wanted to be a property owner ... but, I am kind of glad that I am not one these days. I would have purchased a home years ago, but the prices were too high. My mother was a loan officer at a small town bank and taught me that a $100,000 home would equate to a $1,000 mortgage on a 30 year load, give or take for the interest rate. When home prices are $250K+, that is just out of my price range using her logic. I am kind of glad I didn't get a mortgage on a $250K+ home paying $1000 per month with variable interest rate. I would be screwed now.

Now, I just need to figure out how much I will be bringing home with the garnishment. They are taking 25% of my disposable income. I just need to know how disposable income is defined. I know it can't include taxes. You would think the state isn't going to garnish their own taxes. But considering which state it is, you never know. The garnishment should last more than 3-4 months. I will survive. I am just very detail orientated and want all the numbers correct in my budget right NOW! LOL

Thanks

[rjmwx81]

Let's say you make $1000, gross per check, and your taxes are 25% of your income. So your after-tax take-home is $750. They get 25% of the $750.

Now, let's say you have taxes AND insurance taken out of your check. So you make $1000, Uncle Sam gets 25%, and the insurance company, gets, say, $100. That means you would have a take-home pay of $650. But, the garnishment is based on your after-tax, income not after-insurance income, so they still get 25% of $750.

[LuvMySibe]

Thanks! That is what I was thinking. What about flex spending plan (medical)? I couldn't find anything about that online.

[rjmwx81]

I'm guessing that would work the same way as insurance; that is, funds you apply to that aren't safe. Basically, if it's not a tax, they can grab part of it. At least that's my understanding. Now, the money you've ALREADY put into the FSA, is a different story. Not sure if that's exempt or not. (Just a thought, if you have a bunch of extra money sitting in that FSA, maybe use it to settle the debt and avoid the garnishment? I know it would be a tax hit, but it might be worth it depending on your circumstances. Could be worth at least a chat with an attorney or accountant, or both.)

[LuvMySibe]

I had no idea you could take funds from FSA unless it was medically related. I do not have much extra in the fund (what has currently been deducted minus what has been paid out). I guess any little bit helps.

[rjmwx81]

I'm sure it depends upon the fund, but my understanding is that it's like a retirement account; if you take money out for a non-approved purpose, you have to pay a tax penalty.