Automatic paycheck deductions can be a complicated issue, often because of rules that apply to deduction limits at both the federal and state level. There are two types of court-ordered deductions regarding paycheck interceptions. All automatic deductions are either an income withdrawal order (IWO), a wage deduction for the IRS; or a garnishment. Automatic child support deductions are a form of IWO. This means that the rules regarding deduction limits are different to a standard garnishment and can be more extreme. In addition, the rules can shift when the payee has a second family, so child support deductions are effectively in a single class for deduction limit rules.
Child Support Deductions Are First
A child support IWO will be the first deduction if there are multiple garnishments in place. This situation is common when a parent who is paying child support files for bankruptcy. There is still a minimum amount of money that a garnishment payer can take home, but the order of deduction can make a difference. The minimum amount that a payer may take home may also be reduced if the amount of child support deduction leaves a smaller balance than the legal garnishment threshold. Child support and bankruptcy payments are exempt from the minimum net pay level. This can also occur in child support deduction cases only, which is a common component when multiple dependent children are involved in the IWO.
Federal Deduction Regulations
Child support deduction calculations are uniform across the United States. Child support orders from local courts are subject to federal law, and a child support IWO is often issued as court policy in some jurisdictions. The calculation is based on the Federal Consumer Credit Protection Act, and is based on the arrearage delinquency time period, along with family status. A child support payer with a second family is maximized at 50% of disposable income, while a single child support assignee is maximized at 60%.
Child Support Calculations
There are some general federal guidelines in calculating child support, but states also have considerable power to determine policy as long as the policy fits federal rules. Using Illinois as an example, percentages are normally at least 20% of the payer's disposable net income for one child. Additional dependent children will increase the percentages, so each child support deduction case will be assessed by payer income level. Maximum deduction percentages are set at six or more dependent children.
Child support collection cases are unique in the method in which they are collected. They are civil actions that can evolve into criminal situations in a very short time period, as the threshold for arrearage assessment is 12 weeks. Each state has considerable latitude for determining formulas as long as they are within federal guidelines. Child support payments are also not tax deductible, so there is no financial relief when tax time comes. The federal government has designated child support deductions as a priority in society, and they have assigned administrative requirements to the states with strings attached in order to retrieve administrative costs. Child support deduction schedules can be much more expensive than standard wage garnishments.