With tax season well under way, you may be receiving telephone calls from your creditors demanding payment on your overdue accounts. It is a fact that collection calls and harassment from your creditors will increase during tax season. Your creditors smell money and they want it. As we discussed in Part One, many creditors will tell you they can take or garnish your tax refund. So, get prepared and learn who can and cannot take your taxes.
First, know your rights. Who can offset your tax refund? Through the Treasury Offset Program (TOP), Congress has authorized the reduction or offset of your tax refund to pay certain debts. The types of debts that cause your tax refund to be reduced or taken are few. Your tax refund can be taken for the following debts:
- Past due child support;
- Unpaid federal and state taxes;
- Student loans (with the exception of private student loans);
- Certain unemployment compensation debts owed to a state;
- Military Star (Star Card) and/or Nexcard (Navy Exchange Card).
If you are concerned that you may have an offset this year, you can call the Bureau of the Fiscal Service at 1-800-304-3107 to determine if you have a debt that was submitted to IRS for a tax offset. Also, a bankruptcy can help you keep your tax refund instead of suffering through an offset or reduction in your tax refund. While some of the debts in the TOP program cannot be discharged, you would be still be better to file a bankruptcy case and keep your tax refund than worry each year about whether or not you are going to get your refund.
Now that know who can take or offset your tax refund, you can easily determine who cannot take your tax refund. An “ordinary” creditor may not take, intercept, garnish or offset your tax refund. Examples of an “ordinary” creditor would be credit card companies, such as, Capital One, Wells Fargo, Dillards, Kohl’s, Wal-Mart, Target, etc. Add to that list loan companies and payday loans, such as, World Finance, Springleaf, Cashcall, Advance America, etc. Next, put these creditors on the list of entities that cannot take your tax refund – unemployment compensation (provided no fraud was involved), housing authorities, utility companies, private student loan companies, to name a few. So, as you can see, there are many more companies that cannot touch tax refund than those that can take your tax refund.
Finally, what about an “ordinary” creditor that has a valid judgment against you, can they take your tax refund? The answer is yes and no. No, they cannot intercept your tax refund directly from IRS. So, this “ordinary” judgment creditor is not on the list of eligible creditors with TOP. However, that does not mean you are in the clear. If you deposit your tax refund into your bank account, the creditor can take not only your tax refund but any other monies (except social security and most pensions), through a garnishment of the account. So, be very careful where you deposit your tax refund if you have a judgment against you.
Now that you know the ins and outs of the Treasury Offset Program, and which creditors can take or intercept your tax refund, you will have an answer for those nagging creditors that want to take your tax refund. Remember, you do not have to be bullied into paying the creditors. In fact, using your tax refund to ward off creditors is most likely a temporary solution. If you give the creditor your tax refund you will be without the money you needed, and will most likely still be in debt to other creditors. We encourage you to save your tax refund and talk to a bankruptcy specialist before agreeing to pay anyone.
Give the attorneys at Seymour & Associates a call today at (706) 872-7117! We can show you how to keep your tax refund for the things that matter to you and get rid of your debt!