Use of Federal Grant Funds to pay for employee ordered garnishment

[Craig Umstead]

Jurisdiction

North Carolina

As it relates to a ordered IRS garnishment, can/should a State or Local government use federal grant funds to fulfill the order or should the State of Local government entity use its Fund balance to make payment? Is there prohibition to use Federal Funds in this manner if the base period is not connected to the initial payment from Federal grant funds or any other direct Federal compensation?

 

[Zigner]

As it relates to a ordered IRS garnishment, can/should a State or Local government use federal grant funds to fulfill the order or should the State of Local government entity use its Fund balance to make payment? Is there prohibition to use Federal Funds in this manner if the base period is not connected to the initial payment from Federal grant funds or any other direct Federal compensation?

Why don't you start by explaining the situation?

 

[zddoodah]

As it relates to a ordered IRS garnishment, can/should a State or Local government use federal grant funds to fulfill the order or should the State of Local government entity use its Fund balance to make payment?

An "ordered IRS garnishment" of what? I assume you're talking about someone who failed to pay federal income taxes. Correct? If so, why would any state or local government pay that from any fund of money? Also, what does "its Fund balance" mean (and why is "Fund" capitalized)?

In other words, what are you talking about?

 

[Craig Umstead]

The ordered IRS garnishment was for failure to report and pay adequate taxes.

FUND BALANCE as an accounting term is when liabilities are subtracted from assets, there is a fund balance. A positive fund balance means there are more assets than liabilities; a negative fund balance means just the opposite. A positive Fund balance can be required by sub-agencies in order to receive certain federal and state grant funds.

This term usually refers to Fund accounting is an system for recording financial resources whose use is limited by the donor, grant authority, governing agency, or other individuals or organizations or by law. It emphasizes accountability rather than profitability, and is used by Nonprofit organizations and by governments.

You point is well taken, why would an agency us its own money to pay for a garnishment; the answer in this case relates to the source of the employees salary being partially paid from federal grant funds. So, in fact the fed would be repaying itself unless the agency can find a way to use other funds not designated as coming from any federal or state grant....such as derived interest income.

 

[Zigner]

Ok, now I get it. There is an employee who has a tax garnishment. The employer is required to comply. The fed is not repaying itself, rather, the employee is paying the fed back from his/her wages.

 

[Tax Counsel]

So, in fact the fed would be repaying itself unless the agency can find a way to use other funds not designated as coming from any federal or state grant....such as derived interest income.

The IRS wage levy (the term garnishment is not used in federal tax law) attaches to the wages owed to the employee whose wages are levied. So it is the employee paying the IRS, not the federal government paying itself. If the state/local government may pay wages of that employee out of the federal grant that's all that matters. Who the employee then pays (whether forcibly deducted via levy, required withholding, etc, or voluntarily) doesn't matter.

 

[hrforme]

agree with Tax and Zigner...and I work in HR and payroll for a NFP that gets federal, state, and county dollars to pay wages, program and admin expenses. The wage levy is on the employee's wages after they become wages.