Treasury Offset

• Child support is the only type of dependent debt that is subject to direct garnishment of a tax refund by the IRS. This type of direct garnishment is called a Treasury Offset. The Treasury Offset Program is managed by the United States Department of Treasury’s Financial Management Services (FMS). FMS will garnish the portion of the IRS refund that is owed for dependent support debt and submit payment to the state child support agency that filed the claim. The state passes the garnished refund to the custodial parent. A child support order is required to legally enforce garnishment of an IRS refund.
  
  

Other Dependent Debt

• If you are listed as the joint owner of a credit account or if you co-signed a loan for a dependent, you are responsible for the dependent’s debt. If your spouse is your dependent and you live in a community-property state or in a state that recognizes the Doctrine of Necessaries, you may be responsible for the dependent debt. If you are delinquent in your court-ordered child-support payments, your bank account containing funds from an IRS refund may be garnished. In order for a creditor other than the IRS or Department of Education to take an IRS refund, they must win a judgment against you and/or your dependent.
  
  

Judgment

• Creditors who win a lawsuit against a debtor are granted a judgment. Judgments are court orders that give creditors the power to garnish bank accounts, garnish wages and seize property belonging to the debtor. Any person listed as the account owner of the debt is named in the lawsuit and on the judgment. A creditor armed with a judgment may take money from the bank account of any party listed on the judgment. If you co-signed a loan for a dependent or if your spouse is named in a creditor’s judgment in a state that holds both parties in a marriage responsible for debt incurred in the marriage, then your IRS refund may be garnished, but not directly through the IRS.
  
  

Garnishing Bank Accounts

• If a creditor wins a judgment and proceeds to garnish a bank account for the funds, your IRS refund may be garnished if it is in the account. If you are not named as a party to the judgment and are not deemed responsible due to marriage or through a court order for child support, then you have grounds to appeal the garnishment and potentially have your refund returned to you.