What to Do With an Income Withholding Order for an Employee
Here’s What You Need to Know as an Employer
Many employers receive income withholding orders from employees. The document might be called “Income Withholding for Support.” If you have one of these orders, you’re probably wondering what to do with it. Here’s how to comply with an income withholding order, plus answers to other questions you might have as the employer.
What Is an Income Withholding Order?
An income withholding order (IWO) is an order that directs you (the employer) to withhold a specific amount from the paychecks of an employee. The withholding amounts are used to pay child support, spousal support, medical support, or other types of support.
According to the New York State Child Support Agency, income withholders such as employers help make sure that children have financial and medical support from both parents.
Who Regulates Income Withholding?
All child support enforcement issues, including income withholding orders, are handled by state and local authorities—not the federal government. Each state has different regulations regarding when to begin withholding, mandatory deductions, withholding limits, and other requirements.
The Office of Child Support Enforcement has a list of state agencies, known as State Disbursement Units (SDU), who deal with IWOs.
This list includes a variety of details, such as contact information, fees, state maximums, and other requirements, though the amount of information varies from state to state.
What Does an Income Withholding Order Look Like?
An IWO can come from one of two sources:
- It can be a notice sent by an attorney, tribal legal representative, private collection agency, or individual.
- A court or child support agency called an SDU (state disbursement unit, the state agency dealing with IWOs) can send the order.
Most income withholding orders follow a specific format. If the order is from someone other than a state agency, it may look different, but it should contain all the same information. This information should include:
- The employer, and employee or obligor, meaning the person whose pay must be withheld, and the names of the children
- Order information, about how much you must deduct and what it’s for
- Amounts to withhold per pay period
- Remittance information—who to send the amounts to and when
- Other information
You may receive an IWO for an employee or a non-employee (an independent contractor, for example). As long as you are making payments to that individual, you must comply with the IWO.
What Should I Do When I Receive an IWO?
Review the Form
Make sure that the income withholding order is for one of your employees or for someone else you are paying.
Then, check to see where the order came from—is it a court order or a notice? If there is a cover letter, check to see if the underlying order is attached. The order should direct payment to the SDU or include a provision for authorizing withholding.
If the order doesn’t contain the required authorization, or if you aren’t making payments to that person, return it to the party issuing the order with an explanation of why it’s being returned. If the required authorization is included, you must follow the requirements as ordered.
If you have questions about the IWO, contact the sender as soon as possible, so you don’t incur penalties for not withholding as ordered.
Follow the Directions and Requirements
- Order Information: First, look at the “Order Information” section of the form to see how much must be withheld and how often.
- Amounts to Withhold: If your pay period isn’t the same as the amount in the “Order Information” section, you should see alternatives for different pay cycles in the “Amounts to Withhold” section.
- Remittance Information: Follow the directions and deadlines exactly as listed in the “Remittance Information” section of the form. Each state has options for sending payments electronically. Note the second checkbox at the end of this section indicating if you must send a copy of the form to the employee or obligor.
Is There a Limit to How Much I Can Withhold?
Yes—if you receive an IWO and you already have another order or a garnishment being withheld from a specific person’s pay, you need to check the limits. You can’t withhold from any one person more than the lesser of:
- The amount allowed by the Federal Consumer Credit Protection Act
- The amount allowed by the law of the state or tribal jurisdiction of the employee’s principal place of employment
The federal limit is 50% of the disposable income if the person is supporting another family, and 60% of disposable income if the person is not supporting another family. If the amount is in arrears (behind schedule) for more than 12 weeks, these limits can increase by 5%, respectively.
Disposable income is the net amount after mandatory deductions (including federal, state, and local taxes), FICA taxes, and statutory pension contributions.
Priorities for Kinds of Withholding
- Current support payments have priority over payment of past-due support.
- Federal tax liens may have priority over IWOs—check with your state agency on this.
- Child support IWOs must be paid before other garnishments.
The process for applying maximums to withholding and garnishment amounts is complicated. Be sure to check with your attorney before you attempt to prioritize withholding orders.
Can I Take a Fee for Processing the IWO?
Some states allow employers to take an administrative fee per payment or month, with the maximum determined by state law. For example, in California, employers can withhold an additional $1.50 per payment, while Idaho allows an administrative fee of $5 per payment.
The combined amount of your fee and the amount withheld can’t exceed the limits described above.
What If I Don’t Withhold as Directed?
Each state has penalties for failing to comply with an income withholding order or for not withholding within the state’s requirements.
In addition, you could be subject to a fine for firing, refusing to hire, or taking disciplinary action against an employee because of an income withholding order.