Income Withholding - Answers to Employers' Questions
Employers withhold about 75 percent of all child support collections nationwide and frequently have questions about how to implement income withholding orders (IWOs). The questions and answers below offer helpful information to employers about Implementing IWOs.
What should I do if the employee tells me the withholding is for the wrong amount or that no income should be withheld?
You should explain that by law, until otherwise notified, an employer must comply with the terms of the withholding order as issued. If your employee disagrees with the withholding, he or she should contact the state child support agency or court that issued the order.
You must continue withholding until the child support agency, court, or other sender notifies you to change or stop the withholding.
"Regular on its face" means that any reasonable person would think the IWO is valid. The Instructions for the IWO form clarify this term by saying that an IWO is regular on its face when:
- it is payable to the state disbursement unit;
- a copy of the underlying child support order containing an income withholding clause is included, if the IWO is sent by anyone other than a state/tribal IV-D agency or a court;
- the amount to withhold is a dollar amount;
- the text of the form has not been changed and invalid information has not been entered;
- the order of the text on the OMB-approved IWO form has not been changed, and
- OMB 0970-0154 is listed on the form; and
- it contains all of the necessary information to process the IWO.
May I garnish a commission earned by my employee if I receive an income withholding for child support?
Yes. You may garnish commissions. You can find state-specific information on the State Income Withholding Contacts and Program Information matrix.
No. FWS grants from the Department of Education are exempt from child support withholding. The statutory basis exempting such educational grants is found at 20 U.S.C.1095a (d), and such grant monies are not subject to the "inclusive" provisions of 42 U.S.C. 659 and 5 CFR 581.
Yes, you may withhold additional amounts above the CCPA limit, depending on company policy and state law. If you choose not honor the request, the employee may send additional payments to the child support agency to pay arrears or avoid accruing overdue payments.
Yes. You must honor income withholding orders from tribes. The orders from tribes must be on the Office of Management and Budget (OMB)-approved IWO form. Also, you must follow the payment instructions on the IWO form because tribes do not operate state disbursement units. You can find more information about working with tribes on the OCSE website.
When a company acquires another company, how should it handle the child support income withholding orders for the "acquired" employees?
The acquiring company has the same legal responsibilities, including the responsibility to withhold wages for the child support income withholding orders of its “acquired” employees. The company should continue to honor the income withholding orders but also notify the issuing child support agency as soon as possible about the acquisition and its intent to continue the withholding. The agencies may provide a new income withholding order, depending on state law.
Retention of income withholding orders depends on state law. Some states require that a child support withholding order be kept on file, so you can reactivate the order in the event the employee returns to work. Check the State Income Withholding Contacts and Program Information matrix for more details.
What happens if I do not withhold child support for an employee after receiving an income withholding order?
Employers who do not withhold and send child support payments as ordered are subject to penalties in every state. These may include repayment of the amount of the child support plus penalties and fines. For more information, contact the state agency staff on the State Income Withholding Contacts and Program Information matrix.
If an independent contractor incorporates, am I obligated or allowed to withhold from that corporation?
No. You cannot withhold from the corporation as income withholding applies to an individual. Notify the child support agency, and it will send an IWO form to the newly established corporation.
If an employer makes a contribution to an employee’s health savings account, do I consider that contribution as income when calculating disposable income on a child support order?
No. You cannot garnish contributions made to a health savings account by the employer. See IRS Publication 525 for more information.
You should continue to withhold through the employee's final paycheck and inform the state agency or court immediately that your company terminated the employee. Complete the Termination Notification on the last page of the IWO form (OMB No. 0970-0154), and return it to the IWO sender or submit the termination through e-IWO or electronic terminations, when available.
Which state law applies for “principal place of employment” if an employee has no residence and works in different states; therefore, there is no principal place of employment?
Refer to IRS Publication 463. Factors to consider are:
- The total time ordinarily spent in each place
- The level of business activity in each place
- Whether income from each place is significant or insignificant
- Whether the employee has an official duty state
Is a deduction for a state employee’s retirement plan considered a mandatory deduction from gross income?
If state employees are required to pay into the state retirement plan as a condition of employment with a government agency, it is a mandatory payroll deduction that reduces disposable income. It is similar to other deductions like taxes, Social Security, etc.
Yes. You may find the federal limits for child support withholding in the Federal Consumer Credit Protection Act (CCPA). The limits are based on the employee’s disposable earnings. States may have a limit lower than the CCPA. You may find state-specific information about withholding limits on the State Income Withholding Contacts and Program Information matrix.
If I receive an IWO from one state and the obligor or employee works in another state, which state’s law governs the IWO?
Under the Uniform Interstate Family Support Act (UIFSA), employers must comply with the law of the issuing state regarding:
- duration and amount of current support payment;
- payment address;
- medical support, either as cash payments or insurance coverage available from employment;
- amount of payments for fees and costs of the child support agency, issuing tribunal, or attorney; and
- arrears payment amounts and interest on those arrears.
UIFSA also adds that the state law of the obligor’s “principal place of employment” addresses the:
- employer’s fee for processing the IWO,
- maximum amount to be withheld from income (including lump sums if included in the state’s definition of income),
- time frames for the employer to implement and remit the payments,
- the priorities for withholding and allocating income withheld for multiple child support obligees, and
- any withholding term or condition not specified in the withholding order.
Should I include tips as disposable earnings when calculating the amount withheld for child support?
No. According to the Department of Labor, tips are not earnings for the purposes of wage garnishment. Tips are not to be included in determining disposable earnings when left in cash on the table or patrons adding them on debit or credit cards. Service charges (for example, a 15 percent automatic charge added to the customer’s bill) are income to the employer, but if given to the employee, then they are “earnings” and should be included when determining disposable earnings (income) for child support.
Yes. You may garnish PTO for child support.
Yes. Most states allow you to charge the employee an administrative fee for processing the income withholding order. You can find state fees on the State Income Withholding Contacts and Program Information matrix.
If the fee plus the child support is more than the maximum amount allowed under the CCPA, you may take the entire amount of the administrative fee and make the child support payment less than the amount in the income withholding order. The amount of support that was not paid (because you deducted the administrative fee) becomes part of the arrears owed by the noncustodial parent.
What should I do if I receive both an Internal Revenue Service (IRS) levy and a child support income withholding order for an employee?
You should notify the child support agency that you received a federal tax (Internal Revenue Service [IRS]) levy in addition to the income withholding order. The child support agency can inform you if the IRS levy has priority over the income withholding order.
How do I handle child support withholding when the employee already has garnishments or other income attachments against the paycheck?
You should give first priority to child support withholdings over all other claims against the same wages except federal tax liens entered before the child support order was established. Only federal tax liens entered before the child support order have priority over child support. More information is available in Processing an Income Withholding Order or Notice.
You must send the payment within seven business days, at the most, of paying wages to the employee. The state where your employee works may set a shorter time limit for submitting the payment.
Yes. You may send one check each pay period to cover all child support withholdings for that pay period if:
- you are sending all the payments to the same State Disbursement Unit (SDU).
- you itemize the amount withheld from each employee, date each amount withheld, and include a required identifier, such as the case number.
Yes. You must send all payments to the SDU for income withholding orders (IWOs) issued by a child support agency and orders issued by a court, attorney, or other party except payments for the following types of IWOs:
- issued by a Tribal child support agency,
- entered before January 1, 1994,
- issued by South Carolina.
In most cases, you do not send payments for spousal only support orders to the SDU; however, some states will accept and process those payments.
I received an income withholding order from a child support agency in another state. Must I send payments directly to the other state?
Yes. You must send payments to the SDU in the other state issuing the income withholding order.