Wage Garnishment and Your Tax RefundPublished:
If you’ve had the misfortune of having your wages garnished from a lawsuit, you may be worried about your federal refund status funds. Are they going to be garnished like your wages? Will you have to hand the entire thing over to the IRS? If not the whole thing, how much? Let us set your mind at ease about the issue. You may not have to hand over your refund status check.
IRS Is Not a Debt Collector
You may have heard of certain taxpayers getting their refund status money taken from them because of missed debts. However, this was not the fault of the IRS itself. People who have slipped up on their student loan or child support payments had their refund status money taken because of the collection agencies requesting it from the IRS. The IRS as an entity does not collect on debts except for taxes owed to them.
Thus, if you owe money on a credit card and your wages are garnished, it doesn’t automatically mean your federal refund status funds will disappear. That debt is for you to pay. Unless your credit card company specifically requests the money from your refund status, it is up to you to pay off what you owe.
Even in that special case, the IRS would likely just ignore the order. They are not under any obligation to pay a private creditor funds from any taxpayer’s federal refund status. When that money goes into your bank account, however, that may be a different story.
As there usually is, there is one exception to this rule. While the lawsuit wage garnishment may not give the credit card company immediate access to your refunds status money, you should check the details of the settlement. The company could have put an addendum on the judgment that your federal refund status money must be used to pay them. This is often the case in Chapter 13 bankruptcy settlements.
If you’re unsure, check the judgment on your case. Consult with your lawyer if there are any questions. If this is the case and you were ordered to hand the federal refund status check over, you must comply with the court order.