Basis of Child Support Orders

The Basis of Child Support Withholding Orders

Tax withholdings are a fact of life for an employee, and such withholdings are expected. But at times an employee may also be faced with certain involuntary withholdings, such as child support orders, creditor garnishments, tax levies, etc.

Human resources managers and payroll administrators often face the biggest complaints from employees who simply don’t understand why and how such deductions are being made. The purpose of this, and the following article, is to explain the child support order process and to focus on how the withholding for such orders is calculated, so that employees can understand why such deductions are being made.

What Is a Child Support Order?

Parents have an obligation to care for their children, but at times both parents may not have custody of a child. This is frequently the case in a divorce, legal separation, or when a child is the offspring of unmarried parents. In some cases, the non-custodial parent must be forced legally to help provide support for the child.

A child support order is a legal document from a court of law that establishes that a non-custodial parent must provide some financial support for a child. This legal document provides the following primary pieces of information:

When the non-custodial parent must begin providing financial support
How often the non-custodial parent must provide such support
How much the parent must pay
The duration of the order
Where to send the payment

Child support orders are actually administered by each state, and payments are usually paid to the state agency responsible for collecting support payments and distributing them to the custodial parent. However, oversight is provided by the federal government and several federal laws have been passed to regulate child support, including the following:

Consumer Credit Protection Act (CCPA) of 1977. The CCPA placed limits on how much could be deducted from an employee’s pay to collect past due child support.
Family Support Act of 1988. Prior to this law child support payments had to be overdue before a support order could be issued. Under this law child support orders can be issued as soon as child custody has been legally established.
Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). This act established the means for a standardized withholding order form and the establishment of a centralized collection agency for each state. In addition, PRWORA established the new hire reporting process so that each state could track non-custodial parents.

Child support orders are usually issued to a non-custodial parent’s employer, so that the employer can begin withholding child support payments from the employee’s paychecks. The child support order will state how much should be withheld from each paycheck based on how often the employee is paid (e.g., weekly, biweekly, semi-monthly, or monthly).

What Are the Limits on Child Support Orders?

There are limits on how much of an employee’s payroll can be deducted for child support. These limits are based on the following three factors:

The employee’s disposable earnings
Whether or not the employee is supporting a second family
Whether or not the employee owes 12 weeks or more in back support payments

According to the CCPA, disposable earnings are determined by subtracting all deductions required by law from an employee’s gross earnings. Deductions required by law include withholding for federal, state, or local income tax, social security or Medicare tax, state unemployment or disability tax, and mandated payments for state employee retirement systems.

Deductions for federal and state income taxes will vary based on the number of allowances an employee claims on Form W-4 or a state’s W-4 equivalent. However, once a child support order has been received by an employer, an employee cannot increase his income tax withholding in order to avoid any portion of a child support order.

One caution must be noted at this point. The above definition of disposable earnings is a federal definition. On the other hand, each state may modify this definition by allowing additional deductions (such as health insurance premiums for non-custodial children) in calculating disposable earnings. And some states may include some income as gross earnings that the federal definition does not include.

For instance, the federal definition of gross earnings does not include tips that are paid directly to a server by a customer, but in 1991 the Maryland Court of Appeals ruled that "tips are regarded as a part of wages under state and federal minimum wage laws," so they must be included in gross earnings in Maryland.(Shanks v. Lowe n/k/l Dolle, Md., No. 103, 6/25/01)

A divorced parent who has remarried, or an individual who marries someone other than the other parent of his child, is defined as supporting a second family. The circumstances do not relieve the individual from paying child support, but it does reduce the amount that can be withheld from the individual’s paycheck.

Child support deductions are limited to a percentage of the employee’s disposable earnings. The percentages change depending on whether the employee is supporting another family or is 12 weeks or more in arrears in making payments. The percentages are as follows:

50% - Supports a second family and is less than 12 weeks in arrears
55% - Supports a second family and is 12 or more weeks in arrears
60% - Does not support a second family and is less than 12 weeks in arrears
65% - Does not support a second family and is 12 or more weeks in arrears

The Impact of Child Support Payments

Depending on an employee’s actual earnings, a child support order may or may not have a major impact on take home pay. The actual impact can be determined by examining the actual calculations. These calculations are the subject of the next article entitled How Child Support Orders Are Calculated.