< Back to Search

Income Withholding for Support (IWO) for Private Employers

Published: September 1, 2011
Information About:
Other Public Partners, Courts, Employers
Topics:
Employer Responsibilities, Income/Wage Withholding
Types:
Guides/Publications/Reports

Income Withholding for Support (IWO)

Income withholding is the court- or administratively-ordered deduction of a specified amount from a parent's income for payment of child support. All employers must honor an IWO for child support. Out-of-state IWOs are valid throughout the country including U.S. territories. All entities, including state/tribal/territorial child support agencies, courts, tribunals, attorneys and individuals are required to use the standardized withholding form entitled Income Withholding for Support (IWO) (OMB-0970-0154). Instructions for the form may also be found on the website.

A child support IWO must be paid before all other garnishments, with one exception: a federal (IRS) tax levy entered prior to the underlying child support order. The date that the child support order is established determines precedence, not the date the IWO is served on the employer.

Income is defined as any periodic form of payment due to an individual, regardless of source, including wages and salaries, commissions, bonuses, workers' compensation, disability, payments pursuant to a pension or retirement program and interest.

Not only must child support be paid first, but a higher percentage of the employee's disposable income may be withheld for child support than for other garnishments. The employer deducts the specified amount of child support each pay period and sends it to the state disbursement unit (SDU), which then forwards the payment to the custodial party. In private cases (not enforced by the child support agency) in which the support order was initially issued on or after January 1, 1994, the employer must forward the payment to the SDU. Some states require that all child support payments be sent to the SDU, regardless of date.

Processing the Notice

Upon receipt of the Income Withholding for Support (IWO), the employer should:

  1. Document the date of receipt.
  2. Determine if the order is "regular on its face." See "Note" in the first box on Page One of the IWO form. If the IWO does not direct payments to the SDU, it is not regular on its face and must be returned to the sender. Page One of the instructions gives additional information on when to return an order that is not regular on its face. If the IWO is not regular on its face for any of the reasons listed, the employer must check the box "Return to Sender" on Page Two and return the IWO to the sender.
  3. A copy of the underlying child support order allowing income withholding must be attached if the IWO is not sent by a court or child support agency. If the child support order should be attached but is not, return the IWO to the sender.
  4. Give a copy of the IWO to the employee if the IWO has been issued by another state.
  5. Follow the terms of the order.

Only the employee has the right to dispute the terms of a child support IWO and should do so by contacting the issuing agency or tribunal. The employer cannot contest the income withholding order; however, the employer must contact the issuing agency if unable to implement the withholding because a withholding for current support is already in place for the child and employee. See "Special Situations" below. If the employee has been terminated, the employer must report that termination by returning Page Three of the IWO to the sender.

Follow the law of the issuing state regarding:

  • Duration and amount of child support, both current and arrears
  • Medical support terms
  • Where to remit payments
  • Payment of fees and costs charged (if any) by the child support enforcement agency, issuing court or custodial party's attorney

Follow the law of the employee's principal place of employment regarding:

State law provides for fines against an employer who discharges from employment, refuses to hire or takes disciplinary action against an employee in response to withholding.

  • When to begin withholding
  • When to remit payments (this may be from 1 to 7 days after payday)
  • Mandatory deductions
  • Maximum amount to be withheld (within Consumer Credit Protection Act limits)
  • How to allocate withholding across multiple child support orders
  • Administrative fee that employer is permitted to charge
  • Other terms and conditions that may be set by state law

Withholding Calculations

There are two steps to determine how much to withhold for child support from an employee's income: calculating disposable income and calculating allowable disposable income.

  1. Disposable Income = gross pay - mandatory deductions.
    • Disposable income is the amount of earnings remaining after subtracting certain mandatory deductions from an employee's gross pay.
    • Mandatory deductions include: federal, state and local taxes; unemployment insurance; workers' compensation insurance; state employee retirement deductions; other deductions determined by state law.
    • Note that disposable income is not necessarily the same as net pay. An employee may have a deduction taken from his pay that is not mandatory, such as union dues or a car loan payment.
  2. Allowable Disposable Income = disposable income x CCPA % limit
    • Allowable disposable income is the maximum available for child support withholding. In most cases, the amount ordered to be withheld will be less than the allowable disposable income amount, and the ordered amount can be withheld without any problem. Even if the withholding order specifies a higher payment, the allowable disposable income is the most that may be withheld.
    • The Federal Consumer Credit Protection Act (CCPA) sets limits on withholding an employee-parent's disposable income based on his/her current family situation and child support payment history. The CCPA protects the employee from having an excessive amount withheld. (Some states have enacted laws that provide even more protection to the employee-parent's income, although most states follow the federal limits. See State Income Withholding Contacts and Program Information.)
    • The withholding limits set by the federal CCPA are as follows:
      • 50% - Supports a second family, with no arrearage or less than 12 weeks in arrears
      • 55% - Supports a second family, and more than 12 weeks in arrears
      • 60% - Single, with no arrearage or less than 12 weeks in arrears
      • 65% - Single, and is more than 12 weeks in arrears

Withholding Examples

Allowable Disposable Income

2 Steps to calculate child support withholding:

  1. Gross income - mandatory deductions = disposable income
  2. Disposable income x CCPA % limit = allowable disposable income

If allowable disposable income ≥ ordered amount, then withhold ordered amount.

If allowable disposable income < ordered amount, see Special Situations-Not Enough Money below.

  • Weekly gross pay is $760
  • Weekly child support due is $295
  • Mandatory deductions total $151
  • Employee-parent is single and does not owe back child support

The law of the state where the employee works (the "principal place of employment" state) determines which deductions are mandatory. In some states, the example below would change because things such as health insurance and union dues are mandatory deductions.

Note the following differences between net pay and disposable income in this example. The amount of disposable income, $609, is used to determine child support withholding limits, rather than the net pay, $469.

  Disposable Income Net Pay
Gross pay $760.00 $760.00
Federal income tax (95.00) (95.00)
FICA (45.00) (45.00)
Medicare (11.00) (11.00)
Health insurance (pre-tax)   (25.00)
Union dues   (10.00)
Savings bonds   (25.00)
Union pension   (30.00)
Credit union car loan   (50.00)
  $609.00 $469.00

 

  • Gross pay - mandatory deductions = disposable income:
    760 - $151 = $609
  • Disposable income x CCPA % limit = allowable disposable income:
    609 x 60% = 365.40
    • Note that 60% is the applicable CCPA limit because the employee/parent is not supporting a second family and does not owe any back child support. Allowable disposable income is the maximum available for child support withholding. Allowable disposable income (from Step 2 above) is $365.40.
  • $365.40 > $295.00, so the full $295 is withheld for child support

If you take the same example but increase the weekly child support payment to $400, you cannot withhold the full amount due. You may only withhold a maximum of $365.40. This means that the employee will fall behind by $34.60 and will be "in arrears." Some states charge interest on the overdue amounts. The employee has the option of paying the underpaid amount directly to the issuing agency if he or she does not want to fall into arrears.

Pre-Tax Deduction

Pre-tax deductions (e.g., 401(k) plan contributions) are adjustments to earned income before taxes are deducted, thus reducing an employee's taxable earnings. Although the employee voluntarily elected to trade current disposable income for a deferred benefit, there is no reason to deny a portion of this income to his or her child.

In calculating disposable income for child support, pre-tax deductions must be added to the employee's taxable wages before determining the obligated employee's allowable disposable income.

Gross pay $1,000
Deduct 401(k) contribution pre-tax deduction ($100)
Taxable earnings $900
Deduct mandatory deductions ($250)
Net pay $650
Add back pre-tax deduction $100
Disposable earnings $750

 

Value of Fringe/Non-cash Benefits

The value of fringe benefits such as a take-home vehicle, free parking space, or other non-cash benefit is subject to taxation but is not considered "income" for the purpose of calculation of disposable income for child support purposes.

In calculating disposable income for child support, the value of fringe benefits must be subtracted from the employee's gross pay before determining the obligated employee's allowable disposable income.

Gross pay $1,000
Add value of take-home vehicle $300
Taxable earnings $1,300
Deduct mandatory deductions ($350)
Net pay $950
Subtract value of take-home vehicle from net pay ($300)
Disposable earnings $650

 

Special Situations

Multiple Income Withholding Orders - Same Employee and Same Child

There should not be more than one withholding order for current support for a child. There may be more than one withholding order for a child if only one order has a current support amount due. The issuing agencies, not the employer, are responsible for resolving any duplication. The employer receiving a duplicate withholding order should follow these steps:

  • Continue to honor the first order received.
  • Give your employee a copy of the second order.
  • Contact the issuing agency that sent the second withholding order and inform it that you are already sending withheld payments for the same child to another jurisdiction. Provide payment information such as the amount of the withholding and where the withholding is being sent.
  • Contact the issuing agency that sent the first withholding order and inform it of the second order.

Multiple Income Withholding Orders - Same Employee and Different Children

Federal regulations require that some money must be paid to each order for current support if there is more than one withholding order for the same employee. In addition, states have enacted laws specifying the method for allocating money toward current support due for each order. Thus, some money must be allocated toward all current support orders. The orders should not be paid on a "first come, first served" basis.

Not Enough Money to Withhold Full Ordered Amount

If there is enough allowable disposable income to pay multiple orders, the employer should pay the full amount of current support due for each order. Sometimes, however, an employee's earnings do not stretch far enough to pay all his or her obligations. If there is not enough allowable disposable income, the allocation method of the employee's principal state of employment must be followed to determine how much to pay on each order.

Example:

Order A current support owed: $ 90/month
Arrears owed: $ 15/month

  • Order B current support owed: $ 75/month
  • Order C current support owed: $ 62/month
  • Employee's disposable income: $300/month
  • Assume allowable disposable income is $180

Withholding:

  • Total current support owed: $227/month
  • Total arrears owed: $ 15/month
  • The allowable disposable income ($180) is not enough to withhold the entire amount of current support due for these three orders ($227). Nothing may be withheld to satisfy the arrearage.

Allocation Methods:

States use one of two methods to allocate withheld payments among multiple withholding orders:

Method 1: Pro-rate by allocating a percentage to each order based on the total dollar amount of current support orders.

  • Add total current support due on all withholding orders.
  • Divide each order's current support due by the total of all orders to figure each order's percentage of total.
  • Withhold the percentage of allowable disposable income for each order.
    Order A $90.00 ÷ 227 = 39.65%
    Order B $75.00 ÷ 227 = 33.04%
    Order C $62.00 ÷ 227 = 27.31%
    Total $227.00 = 100.00%

     

    Allowable disposable income (maximum that may be withheld): $180

    Order A $180 x 39.65% = $71.37
    Order B $180 x 33.04% = $59.47
    Order C $180 x 27.31% = $49.16
    Total withheld $180.00

Method 2: Share equally by dividing the allowable disposable income by the total number of orders.

  • Allowable disposable income (maximum that may be withheld): $180
  • 3 orders for the same employee (Orders A, B and C)
  • 180 ÷ 3 = $60 paid to each order

The prorate method is used by 49 states/territories; the equal method is used by six states/territories. See the State Income Withholding Contacts and Program Information matrix for more information.

IRS Tax Levy and Child Support

An IRS tax levy takes precedence over a child support withholding order only if the tax levy was entered before the child support order was established. The priority determination between a child support withholding order and an IRS tax levy depends on the date that the original child support order was established. Remember that the child support order is the order on which the income withholding order is based.

The employer usually is not informed of the original order date. Therefore, the following action is recommended:

  • If a child support IWO is received for an employee who already has a federal tax levy in place, contact the issuing child support agency about this situation. The child support agency can then contact the IRS to discuss an alternate payment plan.
  • If a federal tax levy is received for an employee who already has a child support withholding order in place, contact the IRS and tell them a withholding order is already being honored. The IRS may then elect to contact the issuing child support agency.

A federal tax levy is the only deduction that takes precedence over child support. Remember that child support should always be withheld before the following voluntary and involuntary deductions:

  • Assignment of wages
  • Non-tax federal debt
  • State and local tax levies
  • Creditor garnishment 

Other Garnishments and Child Support

Guidelines: A child support IWO must be paid before all other garnishments. When you have a child support IWO and a garnishment for your employee:

Deduct the child support withholding.

  1. Determine the lesser amount of:
    1. The difference between the weekly disposable income (before the child support withholding) and 30 times the minimum wage
      [30 x $7.25 = $217.50]
      • If the income is paid biweekly, multiply the minimum wage times 60
        [60 x $7.25 = $435].
      • If the biweekly disposable income is less than $435 or the weekly income is less than $217.50, no withholding for garnishment may be made.
    2. 25% of the weekly disposable income.
  2. For the garnishment, you may withhold the amount remaining after the child support deduction up to the lesser amount figured in step (2) above.

Example A: Tony's child support withholding obligation is $180.00/week. His weekly disposable income is $700. Sears serves a garnishment against Tony for a $1,000 debt.

  1. Deduct $180 for child support from Tony's $700 pay (Tony is single and is not in arrears, so up to 60%, or $420, may be withheld for child support.)
  2. Determine the lesser of:
    1. Disposable income minus 30 times minimum wage:
      $700 - $217.50 = $428.50
    2. 25% of disposable income: 25% x $700 = $175
      $175 is the lesser of these two amounts.
  3. Difference between allowed amount for garnishment and the child support deduction taken:
    $175 - $180 = -$5
    The child support deduction of $180 has already exceeded the allowed amount for garnishment; therefore nothing may be withheld for Tony's Sears garnishment.

Example B: Tony's child support withholding obligation is $140/week. His weekly disposable income is $1,000. Sears serves a garnishment against Tony for a $1,000 debt.

  1. Deduct $140 for child support from Tony's $1,000 pay (Tony is single and is not in arrears, so up to 60%, or $600, may be withheld for child support)
  2. Determine the lesser of:
    1. Disposable income minus 30 times minimum wage:
      $1000 - $217.50 = $752.50
    2. 25% of disposable income: 25% x $1000 = $250
      $250 is the lesser of these two amounts
  3. Difference between allowed amount for garnishment and the child support deduction taken:
    $250 - $140 = $110
    $110 can be withheld for Tony's Sears garnishment.

Bankruptcy and Child Support

It is a good idea for the employer to notify the child support agency that a bankruptcy order has been received and simultaneously, to notify the bankruptcy court that a child support IWO is in force. Always follow the payment instructions from the bankruptcy court.

Even if an employee declares bankruptcy, he is still obligated to pay child support. Debts due for delinquent child support are not dischargeable in bankruptcy actions.

Several changes to the bankruptcy law went into effect on October 17, 2005. One significant change related to child support is that the automatic stay provisions under the bankruptcy code no longer apply to the withholding of domestic support obligations from a noncustodial parent's income or wages. This provision means that it is not necessary to ask the court to provide relief from the stay for purposes of withholding the noncustodial parent's support obligation. New income withholding orders must be implemented immediately, and income withholding orders already in place should continue without interruption.

If an employer receives information or notification regarding a bankruptcy filing for an employee, the employer should continue withholding amounts for domestic support obligations. A "domestic support obligation" is defined as a debt or an amount that is in the nature of alimony, maintenance or child support, even if not expressly designated as such. Arrears are included in this definition.

A domestic support obligation includes amounts that are owed to:

  • Spouse
  • Former spouse
  • Child
  • Parent of a child
  • Legal guardian of a child
  • Responsible relative of a child
  • Governmental unit

If there is any doubt about whether a withholding order is a domestic support obligation, please contact the agency, court or entity that issued the withholding order.

An employer may be notified that it is no longer responsible for withholding the payments because a trustee of the bankruptcy court has taken over this task. Withholding should continue until official notification from the agency or bankruptcy court has been received.