Not just any kind of debt collector can file a claim on your tax refund and have it garnished or withheld. There are only four kinds of debt that the federal government will withhold tax refunds for. Those four kinds of debts include federal taxes that are past due, child support payments, state income taxes, and funds for any other federal agencies where you owe debts, such as past due student loan payments.
There is a hierarchy in how these debts are paid when your tax refund is intercepted, which means some of these debts are given priority over others.
How Are These Past Due Debts Paid by My Tax Refund?
Your past due federal taxes are given a priority and those funds are deducted from your refund. The Treasury Offset Program (TOP) allows the tax refund to offset specific debts, including spousal support or child support that is past due, obligations owed for state income taxes, and non-tax debts owed to a federal agency such as student loan debt, and certain unemployment compensation debts, such as those owed to a state to reimburse for compensation that was paid because of fraud or overpayment. Federal debts are paid before any state income taxes would be paid.
Will I Be Notified of the Offset?
If a debt has been submitted for a tax refund offset through TOP, you will be notified by mail with a notice that includes the contact information for the agency that requested the offset, the amount of your original refund, and the amount of your offset. It will tell you the amount of any monies you can expect after the offset has been paid. If you believe there has been an error, you can contact the agency that is listed on your notice.
What About My State Income Tax Refund?
While there is a hierarchy for garnishing a federal tax refund, state revenue services might allow tax refund garnishment for a debt that is past due. Often, delinquent child support payments are offset with a state tax refund. If you have been sued by a creditor or collection agency, then they received a judgment from the court, they can petition the state revenue service to intercept your state tax refund. If it is allowed in your states, it might be approved. To see if your state allows this, contact your state revenue service.
Consult With a FDCPA Attorney
If you are concerned about your tax refund being offset by past due debts, you should consult with a FDCPA attorney. Complete the Free Case Evaluation Form on this page to get your details shared with a local FDCPA attorney who can help you get your financial situation under control. An attorney will go over your situation and determine the best way for you to proceed with your case. Many FDCPA attorneys require no money down, so you have absolutely nothing to lose.