Back to Top Even if an employee or obligor declares bankruptcy, he must still pay child support.
In calculating disposable income, pre-tax deductions must be added to the employee’s taxable wages before determining the obligated employee’s allowable disposable income.
The value of fringe benefits (such as a take-home vehicle, free parking space, or other noncash benefit) is taxable but is not considered “income” for the purpose of calculating disposable income.
See the chart below to determine which state law prevails.
Income is any periodic form of payment due to an individual, regardless of source, including wages and salaries, commissions, bonuses, workers’ compensation, disability, payments pursuant to a pension or retirement program and interest.
If you take the same example but increase the weekly child support payment to $400, you cannot withhold the full amount due. Pre-tax deductions, such as 401(k) plan contributions, reduce taxable earnings for tax purposes, but they do not reduce disposable income for child support.
Although the employee voluntarily elects to trade current disposable income for a future benefit, this income is still available for child support.
Only the NCP has the right to dispute the terms of a child support IWO and should contact the issuing agency or tribunal.
As an employer or income withholder, you cannot contest an income withholding order; however, you must contact the issuing agency if you cannot implement the withholding because a withholding for current support is already in place for the child and NCP.
For more information about multiple orders, see the Special Situations.
Back to Top When processing the IWO, you must consider the laws of both the order-issuing state and the employee's work state, depending on the action or circumstance.