When a person is deeply in debt, the creditor may attempt to collect the debt by filing suit against the individual and seeking an order allowing him to garnish the debtor's wages. When a debtor's wages are garnished, his employer will remove a portion of his paycheck and provide it to the creditor until the debt has been paid off. In most case, private creditors cannot garnish IRS tax refunds.
Garnishment
Garnishments are generally applied to regular sources of income, such as paychecks or, in some cases, benefits provided by government agencies. However, garnishments can also be applied to irregular income, such as tax refunds. However, for the creditor to receive a garnishment, the garnishment order must be approved by a judge. A garnishment, either for wages or for income received only once, can only be garnished if a judge has approved the garnishment.
IRS Refund
A tax refund is a payment by the federal government to an individual equivalent to the amount the individual overpaid his taxes within a given year. The tax refund is not a form of income per se, but is the repayment of money the individual incorrectly provided to the federal government. To receive an order to garnish a tax refund, a creditor must apply to the Internal Revenue Service.
Federal Law
A judge only allows a creditor to garnish an IRS refund if he has grounds under federal law to do so. Under federal law, private creditors cannot garnish IRS refunds. However, if a person owes money to the federal government, such as for delinquent student loan payments, back taxes or child support, the federal government can confiscate a person's income tax refund to help pay off the debt.
Considerations
While a tax refund cannot be garnished by a private creditor, the private creditor can petition a judge to freeze the bank account into which the refund will be deposited. When a bank account is frozen, the creditor may be able to siphon money out of the account legally to help pay the outstanding debt. Although creditors are barred from confiscating certain types of government benefits, they can take tax refunds that have been deposited into bank accounts.
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