Wage Withholding - Income Withholding Order (IWO)

Once a court orders child support, either the court or the child support agency issues a Notice to Withhold that is served on the employer of the paying parent. The IWO will list a specific amount of current child support to be withheld from the paying parent's wages each month. If there is also support owing from an earlier time period, an additional amount will usually be ordered withheld each month. The notice is mandatory and has the same status as a direct court order on the employer - including severe sanctions if the IWO is ignored.

Liability of employers

  • California law expressly prohibits employers from firing, punishing, or refusing to hire an employee because of a child support withholding order.
  • Employers who do not comply with withholding orders will be personally liable for the support and may be subject to contempt of court charges

Process

  • Employer receives Notice to Withhold (and blank Request for Hearing and statement of employees rights.)
  • Withholding order is effective "as soon as possible" but no later than 10 days after it is received.
  • Employer delivers papers to the employee -- a copy of the IWO, the attached statement of rights, and blank Request for Hearing within 7 days of receiving the IWO.
  • Income is withheld from each payment to the employee and sent to the address directed on the NTW within 10 days of being withheld. (Note: employer must report the pay date / date of withholding to ensure proper credit for the employee.)
  • Withholding continues until the employee no longer works for the employer or until the court or child support agency rescinds the order. NOTE: Employers should hold the IWO if there is any chance the employee will return - it is still effective and binding on the employer.
  • If employment terminates, the employer must inform the child support agency immediately of the following: employee name, child support agency case number, date of separation, last known home address, and the new employer's name and address.
    NOTE: Employers should hold the IWO if there is any chance the employee will return - it is still effective and binding on the employer.

Earnings - definition

NOTE: Earnings are broadly defined whether in the context of calculating support, withholding, or reporting by employers. (Family Code section 5206)

Earnings include:

  • Wages
  • Salary
  • Bonuses
  • Vacation pay
  • Retirement pay
  • Commissions
  • Independent Contractor pay
  • Dividends
  • Interest
  • Rents
  • Royalties
  • Residuals
  • Patent rights
  • Mineral rights
  • Natural resource rights
  • Written contract payments
  • Oral contract payments
  • Worker's compensation temporary disability benefits
  • Disability insurance benefits
  • Any other payments or credits regardless of source

Amount to withhold

Withhold the combined amount specified in the IWO -- current plus any payment on past support or other payment ordered in the IWO -- each month.

  • More than one pay period per month - how to withhold - If the employee is paid by a different time period from that specified in the order, prorate the amount ordered to be withheld from each of the obligor's paychecks. Examples for a court order that requires monthly payments follow (note: if the withholding will take more than 50% of employee's net income for the month, see the section immediately following entitled "Limit on withholding amount"):
    • Pay period
    • Monthly - withhold all of the support from each check
    • Bi-monthly - withhold half of the support from each check
    • Every two weeks
      • Preferred method -- withhold half of the support amount from each of the first two checks in each calendar month - make no deduction from the 3rd check, if there is one (unless the first two withholdings that month did not pay the full amount specified in the IWO.
      • Alternate method - If the employer's accounting or computer system does not permit withholding from some checks and not others, an alternate method which withholds the same amount from every paycheck can be used but will cause the employee and employer to be out of compliance with the court order and to incur unnecessary interest (see NOTE, below for problems created by the Alternate method.)
      1. Calculate the yearly support due
      2. Divide by the 26 ( # of pay periods in a year) 
      3. Deduct that amount from each check \
      • Weekly
        • Preferred method -- withhold one quarter of the support amount from each of the first four checks in each calendar month - make no deduction from the 5th check if there is one (unless the first four withholdings that month did not pay the full amount specified in the IWO).
        • Alternate method - same as the Alternate method described under the Every two weeks example above - except, at step two, divide by 52.

NOTE: The Alternate methods described for Weekly and Every two week pay periods will result in payments contrary to the court's order. Ten monthly payments will be less than the court ordered support and 2 monthly payments (the calendar months with 3 pay periods) will be more than the court order. In effect, an arrearage is created in months with 2 pay periods and that arrearage is caught up each six months when a month with 3 pay periods arrives. On a $500 per month order, after 5 months of lower withholding, the employer will have withheld (and the employee will have paid) almost $100 less than was ordered. At the end of the year, the correct yearly amount will have been paid but a small amount of interest will have accrued on the "late" payments.

  • Limit on withholding amount - The employer may not withhold more than 50% of the employees net income. "Net income" is strictly defined as the total owed to the employee minus mandatory federal, state, Social Security, and Medicare taxes, disability insurance, and payments to public employee retirement systems - no other deductions are allowed before computing the 50% limit. (NOTE: under certain circumstances a court can order up to 65% withholding but it is rarely done and will be stated in the withholding order if it applies.)

Cost of withholding -- California law allows the employer to defray the cost of withholding by a $1.00 charge per withholding pay period that can be deducted from the employees wages. The $1.00 withheld cannot come from the support amount being withheld - but is a further charge against the employee.

Multiple withholding orders - same employee- Priority / Computing

  • One order is for support but the other is not - The support order takes priority - regardless of which was served first - unless the other order is for overdue federal taxes and the tax withholding order was served before the support withholding order, then the federal tax order has priority -- if the support order was served first, it takes priority over the tax order.
  • All orders are support orders - Add together the amount of support due for each assignment. If 50% of the employee's net disposable earnings will not pay in full all of the assignments for support, prorate it first among all the current support assignments in the same proportion that each assignment bears to the total current support owed. Apply any remainder to the assignments for the arrearage support in the same proportion that each bears to the total arrearage owed.

Examples

1.  Not enough to pay two current support amounts

Employee's net is $1,200
Maximum that can be withheld = $ 600 (50% of $1,200)
Order #1 = $700 per month
Order #2 = $350 per month
Total = $ 1,050 for the two orders together.
But, the most that can be withheld is only $ 600.

To pro-rate the payment:

First compute what percentage each order is of the total order amount ($700 divided by $1050 2/3   or 66.7% and $350 divided by $ 1,050 = 1/3 or 33.3%).
Second, multiply the total that can be withheld ($ 600) by the percentage calculated for each order: first order, 66.7% x $600 = $400 and, second order, 33.3% x $600 = $200.
Conclusion

    • $400 would be sent on Order #1
    • $200 would be sent on Order #2

2.  Enough to pay two current support amounts but only part of arrears on the two accounts

Employee's net is $1,200
Maximum that can be withheld is $ 600 (50% of $1,200)
Order A = $ 400 current + $ 120 on past due support
Order B = $ 100 current + $ 40 on past due support
Sub-total 1 = $ 500 current
Sub-total 2 = $160 past due
Total = $ 650 current + past due
But, the most that can be withheld is $ 600.
Because the total current amount is less than the total that can be withheld, all of the current on each case can be paid ($400 on one case and $100 on the other for a total of $ 500).
But, the most that can be withheld is only $600 … and after paying the $500 current total, there is only $100 left to pay against the past due total of $160 - so, the past due payments on the two order must be pro-rated.
As in example #1 above, to pro-rate the past due payment:

First compute what percentage each past due order is of the total past due order amount ( $120 divided by $160 = 3/4 or 75% and $40 divided by $160 = 1/4 or 25%).
Second, multiply the total that is left over after current has been paid ($ 100) by the percentage calculated for each order: first order, 75% x $100 = $75 and, second order, 25% x $100 = $25.
Conclusion

  • $400 current + $75 past due would be sent on Order A
  • $100 current + $25 past due would be sent on Order B

Combining Payment

  • Multiple employees with orders
    Payments for multiple employees may be combined into one payment to the child support agency if each employee and each payment is clearly designated with the employee's name, social security number, child support case number, amount of payment and the pay/withholding date. Failure to adequately identify the payments will result in improper crediting and may result in a request for sanctions for the employee and/or the employer.
  • One employee with multiple orders
    Employers may combine all payments for a single employee into one payment.