Is a refund received from the overpayment of garnished wages considered taxable?

-enriqueztwb

I have a wage garnishment situation with a settled case. We have since agreed to $100 per paycheck for the payment plan, but my first few paychecks were garnished at 25% of net pay. I just received a check back from the payee that is a refund of overpayment from those first few checks based on the new agreement.

My question: since the money was originally taken post-taxes from my paycheck, would there be a tax liability here with the refund or is that already considered “taxed money?”

MeganC

Hi Enriqueztwb,

The refund you received from the overpayment of garnished wages is generally not considered taxable income. The original garnished amount came from your post-tax wages, meaning it was already subject to income tax when your paycheck was issued. The refund is essentially returning money that was already taxed, so you typically wouldn’t owe additional taxes on it.

However, it’s a good idea to keep clear records of the refund and any documentation associated with the garnishment and repayment plan. This will be helpful if any questions arise later about your tax filings or payments.

For further clarity on handling wage garnishments and tax implications, IRS Publication 525, Taxable and Nontaxable Income, provides more details.