Who Can Garnish My Federal Tax Refund?

There are numerous reasons that your wages can be garnished, but your federal tax refund has a special immunity from garnishment. Though that doesn't mean it can't be garnished, it is allowed for few reasons and can only be accomplished by certain entities. For the most part, federal benefits are exempt from garnishment by creditors and most civil lawsuits. Your income tax check is no exception.

Allowable Reasons

The entity that issues income tax refunds is the Department of Treasury's Financial Management Service, or FMS. It is also in charge of the Treasury Offset Program which is the program that reduces your refund for authorized offsets to your debt. In other words, the Treasury Offset Program garnishes your tax refund. There are four general reasons that your taxes can be garnished, or offset: past-due child support; federal agency non-tax debts; state income tax obligations or unemployment compensation debts you owe to a state.

TOP

The Treasury Offset Program, or TOP, is basically a collection tool for federal agencies. It is run by FMS' Debt Management Services, or DMS. Any federal agency that has programs that can cause a non-tax debt can send a notice to the DMS with the details of, and authorization for, the collection of the debt. Once received and verified the amount necessary to pay off the debt is deducted from your federal income tax refund. According to the Treasury Department, non-tax federal debt can include "unpaid loans, over payments or duplicate payments made to federal salary or benefit payment recipients, misused grant funds, and fines, penalties or fees assessed by federal agencies". Defaulting on a student loan is an example of non-tax debt owed to a federal agency.

Notification

If your taxes are offset, the FMS notifies you of the amount of the offset, your original refund, the agency getting the refund and their contact information. You can dispute the offset with them. If the amount of your refund differs from the amount the FMS put on the notice, contact the IRS. If you are married filing jointly, the debt belongs to your spouse and you are entitled to a portion of the refund, you can request it by filing Form 8379 either by itself, after you filed your taxes, or with your 1040, 1040A or 1040 EZ.

Debt Collectors

Debt collectors not contracted by the federal government to collect a debt, do not have any jurisdiction over your income tax refund. Your refund cannot be taken as part of a court judgment. Debt collectors will sometimes tell debtors that they will garnish their tax refund. A debt collector who does this can be reported to the Federal Trade Commission and sued in civil court for violating the Fair Debt Collection Practices Act. The Act prohibits debt collectors from making threats that they cannot fulfill, such as having you put in prison for your debt or garnishing your federal tax refund.