In 2013, there were about 13.4 million custodial parents in the United States. Of those custodial parents, 48.7% had legal or informal child support agreements.
As an employer, you might hire an employee at some point who has a child support agreement. If that happens, you might receive an income withholding order. If you do receive an order, you need to know what an income withholding order is and what to do with it.
So, what does income withholding order mean?
What is an income withholding order?
An income withholding order (IWO) is a document sent to employers to tell them to withhold child support from an employee’s wages. The IWO can come from a state, tribal, or territorial agency; a court; an attorney; or an individual.
If the IWO is on an official Income Withholding for Support form, you must honor the requested withholding.
What does income withholding order mean for employers?
If you receive a wage withholding order for one of you employees, you must verify that the IWO is valid and contains all necessary information. After you verify the IWO, you must implement it and begin wage withholding.
Verifying and enacting the IWO
When you receive an IWO, follow these steps:
- Document the date you receive the IWO.
- Determine if the noncustodial parent works for you. If the noncustodial parent doesn’t work for you, complete the fourth page of the order (Notification of Employment Termination or Income Status) and return it to the sender. Otherwise, move on to the next step.
- Make sure the IWO is “regular on its face.” If the order is not regular, return it to the sender.
- The IWO is irregular if it doesn’t include all the information needed for withholding or it instructs you to send the payment somewhere other than the state disbursement unit. For more examples of things that make an IWO irregular, read the IWO Instructions.
- If someone other than a court or child support agency sends the IWO to you, the IWO is considered a notice and not an order. If the underlying order is not attached, you should return the IWO to the sender.
- Give a copy of the IWO to your employee if the IWO was issued by another state or if the appropriate box is checked on the form.
- Finally, follow the terms of withholding and remittance on the IWO.
Withholding child support
You must begin child support withholding by the first pay period that begins 14 working days after the IWO was mailed. Some states require you to start withholding sooner. You must withhold child support until you are told otherwise.
You will use the amounts and percentages given on the income withholding order to calculate how much child support to withhold from the employee’s wages.
Once you withhold child support, you must submit the payment to the state disbursement unit within seven business days of the date you paid wages to the employee. Some states have laws that set a shorter time for submitting the payment.
You can charge the employee an administrative fee for processing the child support withholding. If you choose to do this, you will also withhold it from the employee’s wages. The maximum fee you can charge is set by your state. Also, the fee plus the child support withholding cannot be more than the maximum allowable child support withholding. This means you might withhold less child support to accommodate the fee. The employee would then owe arrearages for the unpaid child support.
If the employee complains about the withholding or says the order is incorrect, do not stop withholding. Tell your employee to contact the agency or court that issued the order. If the IWO does need to be corrected, the agency or court will send you a new IWO. Once you receive the new IWO, follow the instructions on that document.
You must withhold child support each pay period. If you do not withhold and submit an employee’s child support, you will face penalty determined by your state, and your business will be responsible for the missing child support withholding.
What if there are multiple withholding orders?
You can receive multiple IWOs for one employee. What you do with the IWOs depends on if they are for the same child or for different children.
If the IWO is for a different child, you will withhold payments for each order. State laws determine how you withhold the payments.
There can only be one IWO per child. If the IWO is for the same child, follow these steps:
- Continue withholding based on the first IWO received.
- Give the employee a copy of the second IWO.
- Contact the agency, court, or party that sent the second IWO. Tell them that you are already sending payments for the child. Let them know how much you are withholding and where you are sending the money.
- Contact the agency, court, or party that sent the first IWO. Tell them that you received a second IWO for the child.
What if the noncustodial parent doesn’t work for you?
If you receive an IWO and the noncustodial parent does not work for you, you must notify the sender. Complete the fourth page of the IWO (Notification of Employment Termination or Income Status) and return it to the sender.
If an employee is terminated, you must also send notification by using the Notification of Employment Termination or Income Status section of the IWO. The deadline to report a terminated employee is determined by your state.
If you receive an income withholding order, there are some things you absolutely cannot do.
You cannot contest the IWO. As the employer, you simply must honor the IWO. Only the employee can contest an IWO.
You cannot fire an employee because you receive an IWO regarding their wages.
Sometimes, an employee will change their withholding allowances to try to avoid more child support withholding. If you suspect that an employee changed their withholding allowances for this reason, do not question the employee nor report them to any agency. Instead, you must honor the newly claimed allowances. The IRS will withhold child support from any tax refund the employee receives.
Patriot Software’s online payroll software makes calculating deductions easy. You only need to enter the deduction information once, and we’ll do the calculations for every paycheck. You just need to submit the child support withholding to the correct agency. Try out the software for free!
This is not intended as legal advice; for more information, please click here.