Can Debt Collectors Take My Tax Refund?
Tax season can bring about great optimism as well as angst. After a financially damaging holiday season, many people yearn for their income tax return as they often already have plans for how to spend the money before it ever arrives. Whether you are looking to catch up on bills or use the funds to put a downpayment on a house or car, it can feel like years are passing between the time you file your taxes and receive your refund.
When you work hard for your money, the last thing you want to happen is for someone to swoop in and take it before you ever get to see it. This can be a major consideration for individuals struggling with debt issues. If you are someone who is facing legal action from a debt collector, you may feel as if your tax return funds are in jeopardy of being garnished. This is a natural fear, but here’s what you should know about who has access to your tax refund.
Who Can and Cannot Seize Your Tax Refund
You may have multiple streams of debt, but not all collection entities have the right to your money. There are only a few instances when the IRS will allow a tax refund intercept. This can only occur if you:
- Are behind on child support payments
- Have defaulted on student loan payments
- Are behind on income tax payments
To intercept your refund, the agency must submit a request to the IRS. For past-due child support, the child support enforcement office must send their request to the Treasury Department. For defaulted federal student loan payments, the Department of Education would be the entity to submit a request, and the IRS can directly intercept whatever funds are owed to them.
No entities outside of the three mentioned can intercept your tax refund, meaning that private lenders and creditors cannot intercept your tax refund. The following types of debts are examples of debts that require alternative methods of collection:
- Credit card debt
- Past-due car payments
- Medical-related debt
- Payday loan debt
Regardless of the debt you owe and who is coming after it, any entity looking to intercept your tax refund must notify you beforehand, including the IRS. Many entities often use this as a last resort after your failed to set up a payment arrangement.
How to Protect Your Funds from Creditors and Lenders
Although non-government agencies are barred from taking your tax refund before it is disbursed, they can do so after the fact. If a levy is set on your bank account or it has been frozen as a result of a default judgment or court order, any funds that flow into your account can instantly become inaccessible. Protect your funds by mentioning to your tax preparer that you prefer to receive your income tax return via check or prepaid visa. This way you can avoid the stress of trying to rush to withdraw your funds from the bank before debt collectors seize them.
Debt collectors who are continuously unable to collect on past-due payments may choose to take more aggressive and direct approaches, which are often in violation of the Fair Debt Collection Practices Act (FDCPA) or Telephone Consumer Protection Act (TCPA).
Consumer law entitles you to up to $1,000 per FDCPA violation and up to $1,500 per TCPA violation. The Florida FDCPA and TCPA lawyers at The Law Offices of Jibrael S. Hindi can help you recover the funds owed to you and more! Contact us today for a free case evaluation and let Jibrael fight for you!
Frequently Asked Questions About Debt Collectors Taking Your Tax Refund
Can debt collection agencies take my tax refund?
The IRS will allow a tax refund intercept if one of the following conditions apply:
- You’re behind on child support payments
- You have defaulted on student loan payments
- You’re behind on income tax payments
Can debt collectors take your tax refund?
Debt collectors can take your tax refund after it’s deposited into your bank account, but not before. If a levy is set on your bank account or it has been frozen as a result of a default judgment or court order, any funds that flow into your account can instantly become inaccessible.
Can a Judgement take your tax return?
If your bank account has been frozen as a result of a default judgment or court order, any funds that flow into your account from your tax return can instantly become inaccessible.