An Employer's Guide to Income Withholding
As an employer and a taxpayer, you should be aware that federal and state programs have been established to ensure that parents support their children. These programs both encourage family responsibility and reduce taxpayers' costs in providing welfare benefits for the care of children. As a part of these programs, employers served with an order of income withholding must withhold income and transmit it to the appropriate Friend of the Court.
All parents who pay court-ordered support are subject to income withholding; the law requires income withholding to take place immediately for almost all new or modified support orders. Income withholding for child support is not a punishment. Rather, it is equivalent to withholding income tax.
This information is intended to serve as a brief summary of your responsibilities as an employer under current law.
Who must withhold income?
Any employer or other person, referred to as a "source of income", who is served with an income withholding order and owes or will owe income to the payer (the person owing money under a support order). Income is broadly defined to include (among other things):
- salaries, earnings, wages, commissions, bonuses, vacation payments;
- payments due or to be due in the future from a profit-sharing plan, pension plan, insurance contract, or annuity; and
- any amount of money due to the payer as a debt of any other person, including debts of all kinds of businesses.
Must I obey an income withholding order issued by another state?
The Uniform Interstate Family Support Act allows an income withholding order from another state to be sent directly to a support payer's employer. After receiving the income withholding order, the employer is required to do the following: (a) treat an order that appears regular on its face as if the order had been issued by this state; (b) immediately provide a copy of the order to the support payer; and (c) withhold and distribute the money as directed in the order.
When must income be withheld?
An order of income withholding is binding on an employer seven days after the employer is served by ordinary mail with a true copy of the order of income withholding. Included with the order will be a notice of income withholding, which will give the date of mailing, the date to begin withholding, and where to send the money withheld.
How often do I have to send in the amounts I withhold?
Amounts withheld pursuant to an order of income withholding must be paid to the Friend of the Court within three days after the date of withholding.
How do I know if the amount to be deducted changes?
The Friend of the Court is required to advise you if the order is changed. If the Friend of the Court serves the employer with a notice of modification of the order of income withholding, the amount withheld must be changed to conform with the court ordered modification within seven days after receipt of the notice of modification.
How long do I continue withholding money?
The order remains in effect until further order of the court or until the employer is notified otherwise in writing by the Friend of the Court.
What if the employee's income is subject to garnishment or other withholding orders?
An order of income withholding for child support has priority over all other legal process under state law against the same income. This means it takes precedence over garnishments and other payroll deductions (except taxes, social security deductions and other income withholding orders for support). However, you may be prevented from withholding the income under federal bankruptcy law, and may wish to consult with your attorney if given notice of a bankruptcy stay.
What happens if I don't withhold the money?
An employer is required to implement income withholding within 7 days of the order.
An employer is liable for any amount that it knowingly and intentionally fails to withhold from the employee's income except as the payment amount is limited by the Consumer Credit Protection Act. This means the court will require you to pay the amount you should have withheld, even if you have paid it to the employee. The court may also find an employer in contempt of court for failure to obey the order.
Isn't there some limit to the amount I can take out?
The maximum amount taken out must comply with Section 303(b) of the Consumer Credit Protection Act (15 USC 1673(b)). Although deductions for garnishments are limited to 25% of a person's disposable income, amounts withheld for child support can exceed 50% of the employee's disposable income for a work week in certain cases (such as when there are no other support obligations or there is arrearage in excess of 12 weeks). If the income withholding order requires withholding of more than 50% of the employee's income, you should contact the Friend of the Court for information, or consult with your attorney.
What do I have to put on the check to identify it as a support payment?
An employer must identify each withholding payment by the employee's name and social security number, case number, amount withheld, and the date on which support was withheld from the employee's income. The employer must also provide its federal employer identification number to the office of the Friend of the Court.
What happens if I receive more than one withholding order for the same person?
If there is more than one order of income withholding against an employee, and the total amount to be withheld exceeds the limits imposed by Section 303(b) of the Consumer Credit Protection Act, the payments pursuant to the orders have to be allocated in the following manner:
- a. If the total amount in the orders designated as current support exceeds the amount available for income withholding, you must allocate to each order an amount for current support equal to the fraction of total current support represented by that order (i.e., the amount of current support in that order divided by the total amount of current support in all the orders) multiplied by the amount available for income withholding. For example: If you receive two orders, one for $60.00 and one for $90.00 for a total of $150.00, and the maximum allowed by law for withholding is $125.00, you will need to allocate the total allowed between the two orders. The $60.00 order represents 40% of the total and the $90.00 order represents 60%. You would pay 40% of $125.00 or $50.00 on one order and 60% of $125.00 or $75.00 on the other order.
- b. If the total amount in the orders designated as current support does not exceed the amount available for income withholding, you must pay all amounts of current support and allocate the remaining income available for income withholding among the orders according to the fraction of past due support each order represents of the total past due support.For example: You have received two orders, one for $40.00 per week current support and $25.00 per week on arrearages and a second for $50.00 per week current support and $15.00 per week on arrearages, for a combined total of $130.00 per week. Based upon the employees' income, the maximum withholding that would be allowed by law is $120.00 per week. The law would require that you pay the current amount on each order first, or a total of $90.00. This would leave $30.00 available for arrearage payments, with combined orders of $40.00. To calculate the appropriate arrearage payment, you would divide the total amount ordered, $40.00, by the amount required on each order to establish a percentage of the total. Thus, the $25.00 per week order is 62.5% of the total and the $15.00 per week order is 37.5% of the total. Using these percentages, payment on order one would be $40.00 current plus $18.75 on arrears (62.5% of $30.00) and the payment on the second order would be $50.00 current plus $11.25 on arrears (37.5% of $30.00).
Note: FOC Form 11 (Notice of Income Withholding) provides a breakdown of order information. Contact the Friend of the Court for a copy of FOC Form 11.
The withholding order requires dependent health care premiums to be paid to the insurer or plan administrator. What if the amount of support and premium to be withheld exceeds 50% of the employee's pay?
Money withheld must first be applied to pay the full amount of current and past due support. The premium must be withheld only if it does not exceed what is allowed by the consumer credit protection act when it is added to the support amounts paid. The employer is not required to pay any portion of the premium from its own funds unless required by its agreement with the parent.
I have several employees subject to income withholding for support. Must I write a separate check for each one?
When you are subject to more than one income withholding order with the same Friend of the Court office, you may combine in a single payment amounts withheld from all employees and separately identify by employee, social security number, and case number the portion of the payment that is attributable to each individual.
Can I charge the employee for the costs associated with withholding?
Currently, a fee is not allowed for processing Michigan income withholding orders. For an order from another state, an employer may deduct a fee if allowed by the law of the state of the obligor's principal place of employment.
What if the employee says they do not owe the money and demands I pay them? What protects me if I am sued for these wages?
Your payment to the Friend of the Court in accordance with an order of income withholding discharges your liability to the employee as to that portion of the employee's income.
What do I do if this person quits, is fired, or otherwise stops working for our company?
After you have been served with an order of income withholding, you must notify the Friend of the Court if the employee's income from your company is terminated or interrupted for a period of 14 or more consecutive days. In such case, you must provide the employee's last known address and the name and address of the employee's new employer (if known).
What happens if I refuse to hire, or if I take disciplinary action against an employee because of the income withholding?
An employer who refuses to employ, discharges, disciplines or penalizes an employee because of an order of income withholding entered against that employee is guilty of a misdemeanor.
As an employer, do I have an obligation to provide any other information to the Friend of the Court?
Yes, upon the Friend of the Court's request, you must provide a parent's full name and address, social security number, date of birth, amount of wages or other income, employment status, and information about dependent health care coverage available as a benefit of employment.
Laws pertaining to income withholding
- Friend of the Court Act: Michigan Compiled Law 552.501 - 552.535; also found in Michigan Statutes Annotated 25.176(1) - 25.176(35
- Support and Parenting Time Enforcement Act: Michigan Compiled Law 552.601 - 552.650; also found in Michigan Statutes Annotated 25.164(1) - 25.164(50)
- Consumer Credit Protection Act: Section 303(b) of Title III of Public Law 90-321, 15 USC, 1673(b)
- Uniform Interstate Family Support Act (UIFSA): Michigan Compiled Law 552.1101 552.1901; also found in Michigan Statutes Annotated 25.223(101) - 25.223(901)
A Special Note to Employers
As an employer you are making a valuable contribution to the lives of children when you withhold and forward support payments on a timely basis. You have become a valued partner in one of the most effective support enforcement programs in the nation. This continued partnership between the public and private sectors will ensure that Michigan's children have the opportunity to lead happy and healthy lives.