Overview: In addition to payroll withholdings that are required by law, such as income and employment taxes, and for amounts ordered to be withheld for child support, federal tax levies and various types of creditor garnishments, employees often voluntarily choose to have their employer make certain pay deductions on their behalf. These typically include deductions for:
Voluntary deductions are primarily governed by state laws that specify the types of deductions that are permitted and prohibited, as well as the circumstances under which they may be made. Employers need to be familiar with these commonly requested deductions and the various federal and state laws and rules that apply to them.
Wage assignments. An employee may ask an employer to deduct some specified amount of his or her pay and remit it to a creditor to guarantee repayment of a debt. If the employee does not pay the debt, the creditor can recoup the amount owed from the employee's wages as agreed in the wage assignment without the need for court intervention. Many states regulate the maximum amount that can be assigned, what constitutes a valid assignment, priorities of multiple assignments, small loans, and notice requirements.
Union dues. Some collective bargaining agreements give employees the option of paying union dues by payroll deduction or some other voluntary method. This option, known as dues check-off, is permitted under the Labor Management Relations Act provided the amounts withheld by the employer through payroll deduction are applied only to union dues, initiation fees and assessments.
US Savings Bonds. Employees may ask their employer to make deductions from their pay to purchase electronic (not paper) US Savings Bonds in order to take advantage of tax savings. Employees do not pay federal income tax on the accumulated interest until the bonds are redeemed and state or local income taxes do not apply.
Charitable donations. When employees voluntarily donate to selected charities through payroll deduction they can claim a personal income tax deduction for the amounts. Employees donating $250 or more must comply with certain Internal Revenue Service substantiation requirements in order to claim the tax deduction.
Author: Rena Pirsos, JD, Legal Editor
Updated to reflect a forthcoming change in child support remittance requirements.
Updated to reflect amended child support withholding noncompliance penalties, effective July 1, 2019.
Updated to include a creditor garnishment exemption for certain disposable earnings, effective July 1, 2019.
Updated to reflect a forthcoming amendment to the creditor garnishment withholding limits.
Updated to reflect a forthcoming increase in the creditor garnishment withholding limits.
Updated to include forthcoming changes regarding creditor garnishment withholding.
Updated to reflect a change in the priority order for satisfying multiple child support orders, effective April 3, 2019.
Updated to reflect amended creditor garnishment order procedures, effective March 22, 2019.
Updated to reflect changed creditor garnishment withholding limits, effective March 8, 2019.
Updated to reflect the lifting of the stay of enforcement regarding the New York City Fair Work Practices ordinances.
An explanation of commonly requested voluntary pay deductions and the various federal and state laws and rules that apply to them.