When a court, tribunal, or other authorized government agency directs that money be withheld from a person’s paycheck for the support of another person – as in child support, for example – employers have no choice but to comply. What is known as the Income Withholding Order (IWO) is enforceable in every jurisdiction across the United States.
Payroll providers like BenefitMall are familiar with IWO rules. Once an employer submits an order to BenefitMall, they can rest assured that it will be addressed in compliance with the law. Unfortunately, small business owners are often not familiar with the IWO and its legal implications. They need to change that for their own protection.
To that end, here are three things that every employer should know about the IWO:
1. To Whom It Applies
More often than not, an IWO applies to an employer paying a worker on the books. That means either an hourly rate or a salary. But the IWO does not discriminate. According to the U.S. Department of Health and Human Services, court orders apply to:
- an employer – private or federal agency; and
- an income withholder who makes payments to non-employees or independent contractors.
In other words, let’s assume your company works with a couple of independent contractors. If one of those contractors is ordered by a court to make child support payments directly from income, your company would be responsible for withholding the required amount from each check issued to the contractor. Of course, this is contingent upon you being informed of the court order.
2. The Forms to Use
There is a form that employers use to address withholding and payment. It is known as the Office of Management and Budget (OMB) Income Withholding for Support (IWO) form. Those interested in numbers may refer to it as Form OMB-0970-0154. This is the only form to be used for court-ordered support withholding.
Employers should take note of the fact that the Office of Child Support Enforcement revised the form back in 2017. Employers were still allowed to use the old form until August 31 of 2018. There is no longer an option. Employers must now use the new form with an August 31, 2020 expiration date.
Instructions included with the form walk payroll personnel through each step of determining what to withhold and to whom to pay it. Employers should document when they receive an IWO order, then follow the instructions provided by the form.
3. Different State Laws
BenefitMall says that the majority of problems arising from IWO withholding stem from the different state laws that govern IWOs. Like most things in the child support arena, court-ordered withholding is governed by state courts rather than federal courts. Employers are obligated to follow the laws of the issuing state.
For example, say a divorced worker from New York moved to Ohio in order to take a new job. If an IWO was issued in New York, that worker’s new employer is obligated to honor the order. Furthermore, the order must be fulfilled according to the laws of New York State rather than those in Ohio.
There is a lot more to know about the IWO than has been discussed in this article. IWOs run the gamut from the relatively simple to the incredibly complex. BenefitMall recommends that small business owners unfamiliar with the IWO designate at least one person to study up and become the company expert. An even better option is to outsource payroll to a third-party provider that makes it their business to know and understand all applicable regulations.