Legal Definitions - wage-withholding

Wage-withholding refers to a legal process where an employer is required to deduct a specific amount of money from an employee's regular pay and send it directly to a third party. This deduction is typically mandated by a court order or a government agency to satisfy a financial obligation the employee owes, such as child support, unpaid taxes, or outstanding debts. It ensures that a portion of the employee's earnings is directly applied to their legal obligations before they receive their net pay.

Here are some examples to illustrate wage-withholding:

• Child Support Payments: A court orders a parent to pay child support. To ensure consistent payments, the court issues an income withholding order to the parent's employer. The employer then deducts the specified child support amount directly from the parent's paycheck each pay period and sends it to the other parent or a state child support agency. This demonstrates wage-withholding because the employer is legally compelled to divert a portion of the employee's wages to fulfill a court-ordered financial obligation.

• Unpaid Income Taxes: An individual owes a significant amount in unpaid federal income taxes. After attempts to collect the debt directly fail, the Internal Revenue Service (IRS) issues a wage levy to the individual's employer. The employer is then legally obligated to withhold a portion of the employee's wages and send it directly to the IRS until the tax debt is satisfied. This illustrates wage-withholding as a government agency mandates the employer to deduct funds for a tax debt.

• Defaulted Student Loan: An individual defaults on a federal student loan. The Department of Education, or its authorized collection agency, issues an administrative wage garnishment order to the borrower's employer. This order requires the employer to deduct a percentage of the borrower's disposable income from their paycheck and send it directly to the loan servicer to repay the defaulted loan. This is an example of wage-withholding because a government entity compels the employer to divert wages to cover a specific debt.