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Get in Line What's the Pecking Order with Multiple Involuntary Pay Deductions

August 31, 1999
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Related Topics: Finance/Taxes, Featured Article
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Issue: When payday arrives for one of your new employees, your payroll department hits the panic button. Court-ordered child support payments, student loan payments, and federal and state tax levies must all be deducted from Mr. Worker's pay. Your payroll administrator asks, with so many entities jockeying for position for their portion of the employee’s pay, which has dibs on the dough?

Answer: Employers may face a situation in which an employee’s wages are being attached from more than one source. Because the various parties that want a part of the employee’s wages generally do not have knowledge of each other, it is up to the employer to determine which orders must be complied with first. Since federal and state limits exist on the amount of money that may be withheld involuntarily from an employee’s wages, an employer faced with multiple withholding orders against the same employee may not be able to withhold the full amount required by each order.

In what order should pay deductions be made?
In general, the following order should be followed when processing multiple withholding orders against the same employee:

  • Tax levies—Federal tax levies should be satisfied before all other orders for deductions of pay, with the exception of child support orders received by the employer prior to the tax levy. (State law should be checked for the treatment of state tax levies.)
  • Child support orders—Child support orders should be satisfied before garnishments and student loan collections, but generally do not take precedence over tax levies. Two exceptions to this rule exist. First, if the child support order was received by the employer prior to the tax levy, the child support order takes precedence. Second, with respect to a federal tax levy, the IRS may instruct the employer to satisfy all child support orders first, regardless of when the employer received the order.

    What happens if an employee has more than one child support order issued against him? State rules govern how the different orders must be satisfied. In general, the states provide that each order should be satisfied at least in part.
  • Garnishments—Garnishments should be satisfied only after tax levies and child support orders have been satisfied.
  • Student loan and other federal government agency garnishments—No official guidance exists on what priority to give student loan and other federal government agency garnishments. However, it is likely that tax levies and child support orders will take priority. Employers processing student loan and other federal agency garnishments should contact the issuing agency if questions regarding priority arise.

Cite: .15 U.S.C. §1673(b).

Source: CCH Incorporated is a leading provider of information and software for human resources, legal, accounting, health care and small business professionals. CCH offers human resource management, payroll, employment, benefits, and worker safety products and publications in print, CD, online and via the Internet. For more information and other updates on the latest HR news, check our Web site at http://hr.cch.com.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.

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