Of all the ways you've planned to use your tax refund, paying a debt you don't owe certainly isn't one of them. If you've received notice that your refund will be garnished, however, don't panic. Although the Internal Revenue Service can seize your tax refund to pay certain debts, it does offer an objection process. If the garnishment is a mistake, you can use this process to reverse the garnishment and get your refund.
The only creditors who can garnish your federal tax refund are state and local governments. Credit card companies, collection agencies and other lenders can't hold your refund. However, once your refund is deposited into your bank account, it is considered an asset and could be subject to seizure. Two common reasons for tax refund garnishment include federal student loan and child support debt. If you received notice that a private creditor will be garnishing your tax refund, you may have been the target of fraud and should contact the creditor from whom you received the notice as well as the local police.
If your federal tax refund is being garnished, federal law requires that you be given written notice. This notice must include the reason for the garnishment as well as the amount that will be held. If you don't receive a written notice and have not received your tax refund, don't assume it is being garnished. The agency might still be processing it. Use the IRS' "Where's My Refund" website to track your refund.
Request a Review
If you have received written notice that your tax refund will be garnished, you have 65 days from the date of the notice to request a review and state your objection to the garnishment. According to legal advice website Nolo, you should submit a written objection to the address provided on the notification document; it should include your Social Security number, loan information and a request for an in-person or telephone hearing. Explain that you do not owe the debt and why you don't owe it -- for example, your payments were not recorded, your identity was stolen or the loan was cancelled.
State Refund Garnishment
Though you will need to contact your state's treasury department about what steps to follow if your state refund is seized, you will likely be offered a chance to object to a garnishment for a debt you don't owe. Some states may suggest that you obtain legal representation and submit standard state forms to object. You may also be permitted to request part of your refund if you filed taxes jointly with your spouse but only one of you is liable for the debt that resulted in the garnished wages.
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- TurboTax: Who Can Garnish an Income Tax Refund?
- Michigan Department of the Treasury: If Your Refund Is Offset (Held) to Pay a Debt
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Miranda Morley is an educator, business consultant and owner of a copywriting/social-media management company. Her work has been featured in the "Boston Literary Magazine," "Subversify Magazine" and "American Builder's Quarterly." Morley has a B.A. in English, political science and international relations. She is completing her M.A. in rhetoric and composition from Purdue University Calumet.