Table of Contents

Table of Contents

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Are you comfortable explaining paycheck deductions to employees? When it comes to deductions that are required by law or those that you elect on your own, things can get a little confusing. Read on to learn more about involuntary deductions.

What Are Involuntary Deductions?

The best way to understand involuntary deductions is to understand that you cannot opt out of them. They are required by law for one reason or another, which you’ll see below. Involuntary deductions are typically withheld from your employees’ paycheck as a payroll deduction, and your company is legally required to do so in order to avoid fines or penalties. Any way you look at it, these deductions are mandatory. The funds are withheld from employees’ checks and reported to the IRS accordingly.

Voluntary vs Involuntary Deductions

Voluntary deductions refer to those payroll deductions that employees opt into. Voluntary deductions might include retirement savings and health insurance premiums. Your employee agreed to specific amounts coming out of their paycheck, and that is being facilitated accordingly.

It’s important to note that involuntary deductions may come as a surprise to your employees; they may have forgotten or never understood that money is owed to the IRS. Nevertheless, the money is still owed. While your employees may want to contest those deductions coming out of their paycheck for child support or back taxes owed, you cannot do that for them nor can you go to them and resolve the issue. They need to focus their energy on the issuing authority to whom they owe the money, not their employer. You are simply the one facilitating the transfer required by law.

Why Are Involuntary Deductions Necessary?

Now that you understand a bit more about what involuntary deductions are, let’s dive into why they are necessary. It boils down to two main categories.

  • To satisfy debts. Your employees cannot choose to not pay a debt and hope it goes away. Garnishments are legally mandated involuntary deductions. In these scenarios, your organization is provided with a court order requiring money be paid from one of your employees via deductions from their paycheck. Involuntary deductions are set up to protect those agencies or individuals to whom the money is owed and ensure the transfer of cash is being done legally and without issue.
  • To pay taxes. Payroll deductions fund Social Security and other federal, state and local taxes.

Types of Involuntary Deductions

It’s important to understand what types of deductions can come your way as involuntary. Let’s take a look at the list below to clarify.

All Required Taxes

All taxes required by the government are classified as involuntary. This includes federal, state, and local income taxes as well as FICA  (the Federal Insurance Contribution Act, better known as Social Security) deductions. A percentage of the employee’s pay is deducted from each paycheck based on how the employee completed his or her W-4 form.

Garnishments on Student Loans

Payments on student loans may be garnished from your employee’s paycheck. These amounts are not established by your payroll office but by the organization requesting the money. Should the amount be something your employee is not comfortable with, their best bet is to contact the loan agency and work out a payment plan in order to modify the garnishment.

Tax Levies

Should taxes have not been paid accordingly, a tax levy can be placed on wages. Your company will be required to garnish wages by the IRS until the amount is paid in full.

Child Support Payments

If a parent has not paid court-ordered child support, the court may garnish their wages. The state will mandate the required amount, which typically has been established in the divorce decree.

Bankruptcy Repayments

There are two different types of bankruptcy: Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, all rights to any property are relinquished in order to pay creditors, but in a Chapter 13, the person agrees to repay all or part of their debt through payment plans. These payments are typically  paid through involuntary deductions on a paycheck to ensure the agreement is met.

How Do Involuntary Deductions Work?

There are a few things to note in order to protect your organization and support your employees as you navigate involuntary deductions. Let’s review how involuntary deductions work.

Review the Information

When your organization receives an involuntary deduction order for one of your employees, it’s important to review the requested information carefully. Make sure it is for an active employee and that all the information on the notice is accurate and current. It would be horrible to call in an employee for an out-of-date garnishment notice, so be sure you review the information thoroughly.

Inform the Employee

You are required by law to inform the employee of the deduction that will be coming out of their paycheck. While neither you nor the employee are able to change the deduction, they have a right to  know how much will be deducted and why.

Keep a Copy for Your Records

After you have discussed the issue with the employee, it is best practice to give them a copy of the letter and keep the official copy for your records to keep in the employee file. If there is ever a question or dispute on the amount being deducted from your employee’s paycheck, this notice will be critical.

Follow the Request Accordingly

No matter the conversation with the employee, you’re required to follow the order as written. Even if the employee claims they are making payments another way, you’re required to follow the garnishment to the letter. Encourage the employee to reach out to the issuing authority and ensure your organization is protected by abiding by the law.

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Questions You’ve Asked Us About Involuntary Deductions

There should be no effect on taxes. Involuntary deductions should not affect annual gross earned income.
Yes. Different types of garnishments are classified as an involuntary deduction, although they are not the only type of involuntary deduction.
Always go to the source. Check out the IRS(https://www.irs.gov/publications/p525) for all applicable up-to-date involuntary deduction laws.

Shalie has over 4 years of experience working in a variety of HR positions and organizations including: working as an HR department “of one”, working with a start-up based in Europe, to working in a fully established robust USA based HR department. Shalie has experience in multiple states and countries with all aspects of the HR spectrum. She has a passion to share her knowledge and experience to benefit the HR profession!

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