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Author: Sergei Lemberg
Can a Debt Collector Take My Tax Refund?
![Debt Collectors Taking Tax Refunds]()
General Rule: A debt collector cannot take your tax refund directly from the government for most personal debts. However, in certain situations, they may be able to obtain your refund after deposited in your bank account.
If you have a legitimate debt with a collection agency, you should work with them to pay it off. Typically, a collection agency will work with you as long as you are communicating with them and trying to pay your debt.
For certain types of debts, a debt collector may have special access to your tax refund. Also, when a collection agency files a lawsuit for personal debts, the court may award them a judgment. When that happens there are several ways they can collect on that judgment.
However, in some cases, a collection agency may try to illegally take your funds. When they do this they likely violate state law and the Fair Debt Collection Practices Act (FDCPA).
In this article, you will learn what rights a collection agency may have to take your tax refund. You will also learn what to do if they illegally cease or attempt to take your tax refund.
When can a Debt Collector Garnish my Tax Refund?
Certain kinds of debts allow a debt collector to directly withhold a portion of your tax refund. Those include past-due child or spousal support, federal taxes, state taxes and other federal debts. When it comes to these types of debts, past-due federal debts take priority over any state debts.
How does a debt collector garnish my tax refund? Through the Treasury Offset Program. This program automatically deducts the above debts from your tax refund.
How does this program work? You will receive a notice from the agency requesting the offset. The notice will include the amount scheduled for deduction from your tax refund.
Note: Whether a collection agency can access your state tax refund depends on the laws of your state.
What About Other Types of Personal Debt?
For other types of personal debt, a collection agency cannot directly garnish your tax refund. However, once you deposit your refund into your bank account a different set of rules apply.
If a collection agency obtains a judgment against you, they can request access to funds in your bank account. If approved, they may take certain funds from your account, including a recently deposited tax refund.
However, keep track of any legal withdrawals from your bank account, including tax refunds. You also want to make sure a collection agency does not take more than the amount owed.
Note: Each state has specific requirements on the amount of funds that a debt collector can access from your bank account.
Illegal Debt Collection Actions and the FDCPA
One aspect of the FDCPA is to protect consumers from illegal debt collection practices. A collection agency cannot access funds, including your tax refund, without prior approval. In addition, they cannot use any deceptive tactics in an attempt to deceive you into handing over any funds.
If a collection agency provides false information to access your tax refund they violate federal law. This includes misrepresentations made to you, your bank or the federal government.
How to Respond if a Collection Agency Illegally Takes Your Tax Refund
If a collection agency illegally accesses your tax refund or other funds, you must take action immediately. Since this is a serious violation, you should consider filing a lawsuit. Injunctive relief from the court can stop further violations as you work to get the funds back that they took.
You can also report the debt collector’s violation to certain federal agencies. You can submit a general consumer complaint to the Consumer Financial Protection Bureau (CFPB). If there is a specific violation of the FDCPA, also report it to the Federal Trade Commission (FTC).
Conclusion
If you are dealing with a collection agency, do your best to work with them to pay off the debt. Because if a collection agency files a successful lawsuit, they may be able to garnish money from your bank account. This includes your tax refund, paycheck and more.
However, a collection agency may also try to illegally access your tax refund. If this is the case, you should immediately contact a consumer rights attorney. They can make sure a collection agency does not get a hold of your money illegally.
About the author:
Sergei Lemberg is a consumer rights attorney, practicing since 2006, whose practice focuses on consumer law, class actions and personal injury litigation. He is known for a United States Supreme Court case (Facebook v. Duguid) defending consumers from autodialers under the Telephone Consumer Protection Act of 1991 to send unsolicited text messages. He is also the author of Defanging Debt Collectors, a book that teaches consumers how to battle debt collectors and win.
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