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Garnishing tax returns

Spring not only brings with warmer weather, but also the tax season. For many creditors and collection agencies in West Palm Beach, this time of year is often as busy one as people often use the money to get back from the government to pay off outstanding debts. Yet some may be less than willing to part with their income tax returns (even if they have debt claims against them). Many creditors often wonder if the collection assistance offered through a garnishment can be applied to tax returns. 

The answer to that question is yes...and no. Only state and federal agencies have an automatic right to garnish tax returns. According to Intuit, there are a select few other types of debt that do allow those collecting on them to seek a tax return garnishment. These include: 

  • Unpaid taxes
  • Child support arrears
  • Debts owed to local governments

Private companies cannot garnish returns. Yet that not necessarily mean that tax return funds are immune from a commercial creditors garnishment efforts. Once a debtor has deposited their return in their bank account, it may be available to be garnished. 

The Consumer Financial Protection Bureau reports that creditors can garnish a debtor's bank account. An agency would simply need to petition for judgment against a debtor that would allow it to pull funds directly from the debtor's bank account. If and when it is approved, the creditor must forward the judgment to the bank and identify the proper payee. Any funds open for garnishment will then be frozen pending transfer to the creditor. Thus, a debtor attempting to shield their return may still see it taken to resolve their outstanding liabilities. 

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