Tax Refunds Exempt From Garnishment
Collection agencies love garnishment because it provides them with a way to recover unpaid debts without having to rely on the debtor to send in a payment each month. Garnishment ensures that payments arrive on time each and every month until the debt is paid in full.
Government Debt Collection
I can't bring up tax refunds and claim that creditors cannot garnish them when there is one glaring exception to this rule – the government. If you owe back taxes or unpaid student loans, rest assured your tax refund will either be garnished or withheld in its entirety.
You see, its entirely too much trouble for the IRS to work with commercial creditors in order to facilitate garnishment of tax refund money. Your right to your full tax refund, even if a creditor holds a judgment against you, isn't a way for the government to ensure that you have the money you need. It's merely inconvenient for the IRS to permit creditors to garnish tax refunds before they are sent out.
How do I know this? All other forms of income that are exempt from garnishment are exempt due to a special status as a "benefit" (usually, but not always, a federal one). These benefits are exempt from both types of garnishment. Your tax refund is not a benefit of any sort. It's your money. It was always your money. You just used it to pay your taxes. It's no more exempt from seizure than money you receive when you return an item to a department store.
Protecting Your Tax Refund From Seizure
Because debt collectors cannot garnish your tax refund directly from the IRS, you should receive your full refund. Provided you cash your refund rather than depositing it into your bank account, debt collectors – even those with a judgment against you – will not be able to touch it.
|Get your tax refund on a pre-paid Visa card.|
One thing to remember: If you are e-filing, request that the IRS mail you your refund via a check or prepaid Visa card (yes, they do that. Cool, huh?) rather than using direct deposit to deposit the money into your checking or savings account. While direct deposit is much faster than getting your refund through the mail, its also much safer and less stressful than waiting with baited breath for your refund to clear before racing to the bank to withdraw it before the collection agency can freeze your bank account.
Funds Exempt From Bank Account Garnishment
Make Yourself Judgment Proof
Checking Account Garnishment