Garnishment

What is a Garnishment?

A garnishment is a legal process in which one person (the garnishee) is ordered to withhold money due to another person and to pay the money held over to a third party. So for example, if A owes money to B, then C can be instructed to hold money due to A, and to pay the money withheld over to B.

A typical example is when an employer is asked to garnish wages sometimes referred to as a payroll garnishment, in this case a garnishment notice is served on the employer who in accordance with the garnishment order, is instructed to withhold money due to the employee for wages, and to pay that money to a third party, usually the courts, for unpaid taxes or child support.

For a business, a garnishment payable represents monies deducted from the employee and owed to the courts or the tax authorities, and is shown as a current liability in the balance sheet of the business.

For further information see the Wikipedia garnishment definition.

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Last modified March 23rd, 2016 by Michael Brown

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.

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