Tax Refunds and Garnishment

You may be expecting a federal tax refund. But will you actually get it if you owe money to creditors?

Manta Law, a Tampa Bay boutique firm representing individuals and consumers in a variety of matters, wants to make sure you’re informed about how the law of garnishment applies to federal income tax refunds. 

Garnishment by Federal and State Agencies

Under the Treasury Offset Program (TOP), federal and state government agencies may collect outstanding debts owed to them by garnishing or offsetting your debt with your tax refund. They’ll be able to take your money before it ever gets to you.

The types of government debts that are eligible for TOP include:

• past-due court-ordered child support payments
• outstanding debts with federal agencies other than the Internal Revenue Service
• past-due state income taxes and
• any unemployment compensation you must pay back.

Who Gets Priority?

The Internal Revenue Service always takes priority. So, before any other federal or agency can you’re your tax refund, you must be caught up on your federal income tax payments. The IRS always applies any income tax refunds to outstanding income tax payments.

What comes next? Child support. If you are entitled to a federal tax refund, the state agency that governs your child support will have next dibs.

Next in line are nontax federal debts. Any federal agency you owe has the next shot at garnishing your tax refund. This is where past-due Stafford loan payments would come in.

The last in line are debts owed to state government agencies. Example here include unemployment compensation payments that need to be returned or outstanding state income tax debts.

Can Private Creditors Garnish Your Federal Income Tax Refund?

A private creditor cannot garnish your federal income tax refund unless it’s deposited into your bank account. If you receive the refund via check and cash the check, your money is safe, unless you later put that money in the bank. So, make sure you don’t deposit the funds in the bank. Also, do not provide any direct deposit information to the IRS when you file your income tax return. 

How Manta Law Can Help in Your Garnishment Case

If a creditor is attempting to garnish your wages or bank account, you need to act fast. You will need to file a Claim of Exemption if one applies. Manta Law represents individuals whose wages or bank accounts are being garnished. We represent residents of Tampa, Temple Terrace, Wesley Chapel, Odessa, Oldsmar, Town and Country, New Port Richey, Clearwater, Largo, Palm Harbor, and St. Petersuburg. Contact us today.