IRS Can Now Collect Back Taxes From Federal Employees' TSP Accounts

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By on September 11, 2014 in Current Events with 77 Comments

If you are a federal employee with outstanding tax debts, you may find that money from your TSP account is garnished to make good on those debts.

The Federal Retirement Thrift Investment Board (FRTIB) issued a final rule on September 10 in the Federal Register that makes TSP accounts subject to federal tax levies.

While this new rule might seem insignificant, the IRS has recently reported that collectively, federal workers owe $3.3 billion in back taxes. This new rule may help to collect some of that money.

TSP accounts will be frozen after the TSP receives a qualifying tax levy or criminal restitution order. After the participant’s account is frozen, no withdrawal or loan disbursements will be allowed until the account is unfrozen. All other account activity will be permitted, including contributions, loan repayments, adjustments, contribution allocations and interfund transfers. Once a disbursement from the account is made in accordance with the restitution order or levy, the hold will be removed from the participant’s account.

We reported the proposed rule earlier this summer when the FRTIB originally proposed the rule in the Federal Register. It was open for comment until August 26. Only one comment was received, and it expressed opposition to the rule of garnishing tax debts from TSP accounts. Opposition alone didn’t sway any of the proposed rules however. In the final rule just published, the FRTIB responded to the comment, stating, “The Thrift Savings Plan is required by law to honor IRS levies and criminal restitution orders, and the regulations only explain the payout process. Therefore, the Agency is publishing the proposed rule as final without substantive modification.”

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About the Author

Ian Smith is one of the co-founders of He enjoys writing about current topics that affect the federal workforce.