Who Can Take Your Tax Return For Outstanding Debts?
As a rule there are only three entities that can directly garnish your federal tax return legally. That is the government, the Department of Education and your State Revenue Service. The government can retain your refund if it finds that you owe any back taxes to the federal government. The Department of Education can garnish your income tax return for past due amounts on federally backed student loans. You state department of revenue can garnish your income tax refund for state taxes that are due or for student loans that are guaranteed by the state. All three of these entities will notify you with their intention of keeping your refund.
Can A Bill Collector Garnish My Income Tax Refund?
A bill collector can not directly attach their debt against you to your income tax return. However, bill collectors can indirectly gain access to your refund by getting a judgment against you. Once the judgment has been awarded they can request the court to issue a seizure on your bank accounts. If your income tax refund has been direct deposited into one of these accounts the creditor can seize the funds through this court order.
Can I Fight Any Of These Garnishments Against My Tax Refund?
Simply put, no. Once a government agency has garnished your tax return the money is gone. There is some recourse for an injured spouse, but the process is often hard to prove. If the outstanding debt is a student loan belonging to only one person in the marriage, the other spouse can apply to have their part of the refund given directly to them and not applied to the debt. If it is past due taxes that are owed, both spouses are considered liable for the debt.