How to Know If You Have a Tax Garnishment From a Collection Agency
If you fail to pay certain debts, your tax refund check can be garnisheed. Only the federal government's collection agencies can garnishee tax refunds. However, other creditors can go to court and get a judgment against you for monies owed to them, and that judgment can include a freeze on your bank account. If your tax refund is direct-deposited, it indirectly will go to the creditor. Also, federal collection agencies and your state tax department can garnishee your state tax refund. As far as tax garnishment by a federal collection agency, there are signs to let you know the process is occurring.
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Instructions
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Learn the circumstances under which a tax garnishment happens. Under the Federal Payment Levy Program, or FPLP, and the State Income Tax Levy Program, or SITLP, the IRS can take your tax refund to satisfy a tax debt. The U.S. Treasury Department's Financial Management Service, which handles the issuance of federal tax refunds and the collection of delinquent non-tax-related debts such as child support, may withhold tax refunds to satisfy a related debt. Furthermore, the U.S. Department of Education can garnishee your tax refund if you default on your student loan's repayment terms. Note that the state can garnishee your state tax refund if you have delinquent taxes such as property or state income tax.
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Pay attention to any notices the agencies send you. The collection agencies will notify you before they proceed with a tax garnishment. For instance, the IRS's policy includes assessing the tax owed, sending you a Notice and Demand for Payment, and issuing a levy notice if you do not pay the tax.
You might be able to avoid tax garnishment by calling the agency and inquiring about your payment options. For example, the U.S. Department of Education's payment options include a "forbearance," which temporarily stops your payments or allows you to temporarily make reduced payments.
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Be aware that if you owe taxes, your future tax refunds might be subject to tax garnishment. For instance, say you filed your federal income taxes for 2007 and owed taxes, which you have not paid. However, after filing your taxes for 2008 you are due a refund for that year. The IRS will use your 2008 refund to offset what you owe for 2007. Then it will send you the difference, if any.
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Tips & Warnings
Before going to court to get a judgment against you, the collection agency for the creditor sends you notices requesting that you pay the bill or contact it within a specified time frame. If you ignore the notices, it will send you another notice informing you of its intent to take legal action against you. Once a court-ordered garnishment is approved, the courts will send you a copy of the order.
References
- Photo Credit tax forms image by Chad McDermott from Fotolia.com
