Involuntary and Voluntary Pay Deductions: Kentucky
Federal law and guidance on this subject should be reviewed together with this section.
Author: Vicki M. Lambert, The Payroll Advisor
- Employers that receive an income withholding order (IWO) for child support must begin withholding immediately. Payments must be remitted with seven business days after the amounts are withheld. Federal CCPA withholding limits apply, and employers may deduct a $1 administrative fee. Employers must notify the Kentucky Department of Revenue if an employee who is subject to an IWO terminates employment for any reason. See When and How Much to Withhold.
- Kentucky encourages payment of withheld child support by electronic funds transfer (EFT), although it is not required. See Electronic Payment Requirements.
- An employer must take certain steps to comply with a creditor garnishment withholding order issued against an employee's earnings. Orders must be satisfied in the order in which they were served on the employer. Withholding may not exceed statutory limits. See Creditor Garnishment Withholding.
- Kentucky law is silent as to whether voluntary wage assignments are permitted. However, internet payday loans are illegal in Kentucky, so employers need to be careful about honoring voluntary wage assignments. See Voluntary Wage Assignments.
- An employer may be required to withhold from an employee's wages to satisfy a tax levy if the employee has unpaid state taxes. If so, the Kentucky Department of Revenue will send the employer an official letter explaining when withholding must begin and how much must be withheld. The employer will also receive Form 12A507, which provides a table of levy-exempt wages, salary or other income. See Tax Levies.