Who Can Garnish Tax Refunds? A Guide to Protecting Your Money

Who can garnish your tax refund is a question that arises when you have overdue debts and money coming back from your annual federal tax filing. But only a federal agency, starting with the IRS, can take money from your refund before it gets to your bank account.

Private creditors, including credit card companies, mortgage holders and landlords, can only grab a piece of your tax refund after it hits your bank account — and only if they have a court order.

If you have concerns that a creditor is going to step in and take all or part of an upcoming refund, federal law is on your side.

Understanding Tax Refund Garnishment and the Treasury Offset Program

If you’re expecting a tax refund, you’re depending on the Bureau of the Fiscal Service (BFS) to get it to you.

BFS manages any money that flows into or out of the Department of the Treasury. It collects all the treasury’s revenues, including delinquent debt, and distributes money to Americans who are entitled to their funds. These include payment of loans, surety bonds, savings bonds, public debt and tax returns.

In fiscal year 2025, BFS collected $5.23 billion in delinquent debt — most of it ($4.74 billion) through the Treasure Offset Program (TOP). The TOP collects past-due debts from people who owe money to state and federal agencies.

Examples of debts the TOP would collect are:

• Overdue child-support payments
• Federal student loans
• Past-due federal tax payments
• Overdue state income taxes
• Delinquent overpayments from the Supplemental Nutrition Assistance Program (SNAP)
• Unemployment insurance overpayments

The Treasury Offset Program has an established order of priority for debt collection. Overdue federal taxes sit at the top, followed by money owed to other federal agencies such as overdue student loan payments or money owed to the Veterans Administration, Housing and Urban Development or the Small Business Administration.

The IRS always gets paid first. Other federal agencies come next, followed by states and private entities. It’s worth noting that the IRS can garnish wages without needing a court’s permission. However, the IRS must send a Notice of Intent to Levy at least 30 days before starting any levy.

Federal agencies that want to collect from you also must follow due process, which includes sending you a notification at least 60 days in advance of submitting a collection request to TOP. This gives you time to clear up any confusion or misinformation about the situation — and time to make a payment before a collection is needed.

Finally, there’s a difference between an offset, which is an administrative process, and a garnishment, which is court-ordered. Typically, a garnishment concerns wages and not a one-time money grab.

Can Debt Collectors Take Your Tax Refund?

Private debt collectors can’t take your tax refund directly from the IRS or the Treasury. Only the IRS and other federal agencies can seize your tax refund before you receive it.

But once your refund gets to your designated bank account, private creditors have access to it, provided they have a proper legal assessment. These collectors must follow the Fair Debt Collection Practices Act (FDCPA).

If you’re wondering, “What is debt collection?” you’re not alone. It’s a standard legal process, although it might not seem like it, given the chaos and pressure you feel.

For any creditor to start a legal collection process, the creditor must have won a court judgment against you. Any judgment shouldn’t be a surprise. The creditor will have to sue you, and you will have had the chance to defend yourself in court.

If a creditor wins a judgment against you, it must correctly identify itself to you, tell you how much you owe and to whom. Creditors also must make you aware of any dispute or appeal process you’re entitled to.

They’re not allowed to call you before 8 a.m. or after 9 p.m. If you file a dispute in writing, they must stop all collection efforts, including phone calls.

Bank Account Levies: The Hidden Risk to Your Refund

Banks often play a role in debt collection, including with your tax refund. Unfortunately, your bank may not help if you’re trying to protect your money from creditors. If a creditor knows the banks in which you keep your money, the creditor can show its judgment against you — or serve the bank with a garnishment order.

Creditors can convince your bank to freeze your account as soon as a deposit is recorded. This freeze will prevent you from withdrawing money from or writing checks against your account. You won’t be able to use your debit card or take cash from an ATM.

This is all part of the debt recovery process.

But you can take a couple of steps to make yourself aware of a pending freeze or garnishment. First, before you file your tax return, you can check your legal status to find out if there are any active financial judgments against you.

The place to look is the website for the civil court clerk in your municipality (county, township, parish, etc.) Search for your name. If you’re not comfortable with online record searches, you can call your court clerk’s office or visit the office in person.

If a judgment exists, court records should have all the documentation, some of which will detail the nature of your debt and the amount. The court filing also may have any documents that it served — or plans to serve — to your bank(s).

Also, call BFS (800-304-3107) to verify if any offsets are pending. You can also check your status online in the TOP system. Check this before you file your tax return.

How to Stop Tax Refund Garnishment

Believe it or not, you can put a stop to the full garnishment of your tax refund, but you must qualify for it or live in a state that provides specific protection. Let’s look at these exceptions.

Injured Spouse Exception – Form 8379

One exception to a garnishment is for an injured spouse when a married couple files their taxes jointly. That spouse, through an IRS Form 8379 filing, can get his or her share of a joint tax refund without garnishment. The other, non-injured spouse will still incur a garnishment.

Under this exception, you can’t claim to be an “injured” spouse if your claim is that you are innocent of the tax-withholding action.

“Generally, both spouses are responsible for paying the full amount of tax, interest, and penalties due related to your joint return,” according to the IRS. “However, if you qualify for innocent spouse relief, you may be relieved of part or all of the joint tax liability.”

There are also circumstances in which you can obtain tax garnishment relief without having an injury. These often come into play when dealing with tax debts of former spouses and if you’re a victim of spousal abuse.

You must file Form 8857 and include attachments if you believe your circumstances warrant relief. You must also make your filing within two years of the IRS attempting to collect the debt. Attachments may include copies of a bankruptcy filing, a court judgment against your spouse, evidence of fraud and other relevant matters.

Offset Bypass Refund

The official term for the IRS keeping part of your tax refund to pay an existing tax debt is “refund offset.” But even if you’re in a position where this is going to happen, you can escape losing your refund if it causes financial hardship. You want to request an Offset Bypass Refund (OBR) because of your hardship.

Hardships include:

• You face eviction or homelessness
• You won’t be able to pay your mortgage or rent
• You face the shutoff of a utility (water, electric or gas) because of non-payment
• You need your refund to pay for essential medical care

However, you have only a short time to ask for an offset bypass refund. You’ll need documentation about your hardship, such as an eviction letter or a past-due utility notice. File this paperwork and your request when you file your tax return. And you must file your return on time.

Before you file, contact the IRS and let it know that you’re requesting a refund bypass.

State-Specific Protections from Garnishment

Residents in several states enjoy important special protection from creditors because of state laws. For instance, North Carolina, South Carolina, Texas and Pennsylvania outlaw to varying degrees wage garnishment because of consumer debt.

New Jersey, Missouri, and Delaware are among states that shield wages from garnishment at a higher percentage than the federal government. The CCPA caps wage garnishment at 25% of weekly disposable income or at the amount by which weekly pay exceeds 30 times the federal minimum wage, whichever is less.

In a few states, laws exist that allow you to keep a predetermined minimum balance in your accounts. Nevada ($400 up to $10,000) and Massachusetts ($2,500) protect minimum balances.

Check with your state’s department of labor about which laws affect wage garnishment.

Quick warning: no state laws exist to prevent the IRS from intercepting a tax refund.

Proactive Steps to Safeguard Your Refund

If a creditor starts the process of garnishing your tax refund, you can take a few proactive steps to safeguard your money.

You can always ask the IRS to send your refund by paper check instead of an electronic direct deposit. Without a scheduled direct deposit, your bank will lose the power to freeze these funds or seize them on behalf of a third-party creditor.

You can then set up an account with a different bank, deposit your refund and gain access to that money.

A more upfront tactic is to pre-negotiate a payment plan with the IRS. Any payment agreement you make with the IRS will prevent your debt from reaching the offset status. The government won’t have a reason to take your tax refund because you already have a structured payment plan in place.

If you typically work with a tax professional, that relationship can assist you in working with the IRS and developing a payment plan that works for you.