It's a daunting possibility, but it can happen: you work hard all year, you're eagerly awaiting your tax refund, and instead of a check you receive a notice from the Internal Revenue Service telling you that it's sent your money to someone else. Your refund can't be garnished, but it can be intercepted, plucked away before it reaches you to satisfy certain debts. The list of creditors who can do this to you is very short, however.
Only federal and state governments can intercept your tax refund. If a debt collection agency is pursuing you for payment, the IRS won't cooperate and send your refund to them instead of you. This isn't to say that bill collectors can't get to the money, however. After you receive the refund, if you deposit it in your bank account, creditors can levy against the account and take the money that way. You'd have warning of this, however. Debt collectors can't take such an action without suing you in court first and receiving a judgment against you for the money owed. If you're positive you haven't been sued, your refund is safe.
If you owe someone money and you're paying through the government, this changes the situation. For example, if you pay child support through your state's services and if you fall behind, you may lose your refund. Your arrears or past due balance must reach $500, or $150 if your child's other parent is receiving Temporary Assistance for Needy Families. If you fall this far behind, your state is obligated by federal law to tell the IRS. You'd receive a notice instead of your refund, telling you that your refund has been sent to your state's support enforcement agency, which will then send it to your child's other parent. Your ex can't take matters into her own hands to arrange for an intercept unless she's collecting your support through state services. Only your state's collection unit can initiate such an action.
The government can also intercept your refund for a few other types of debts. If you default on student loans, the federal government can take your refund up to the amount you owe. If you owe the IRS taxes from previous years, you won't receive your refund either. The IRS will keep it to satisfy your tax debt. Your state can also take your refund for past due taxes or for any other government-related debt.
If you legitimately owe the debt for which your refund has been intercepted, you usually can't get it back. If you don't owe the debt, however, you can file an appeal. When you receive notice of the intercept, it will typically tell you who you can contact to request a hearing. At the hearing, you can show proof that the debt has been paid – or at least that you've paid it down some so it's less than the amount that was taken. If you filed a joint married return and your refund was intercepted because your spouse owes child support, student loans or past due taxes, you might be able to get back at least your portion. You can file a request for injured spouse relief with the IRS, notifying them that your share is not subject to the debt. If the IRS agrees, you'll get your money back.
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.