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Hello, I’m Scott from Turbo Tax with some important information about your tax refund.
Do you have an outstanding debt that’s past due
and you’re concerned that a collection agency will take your federal tax refund because of it?
Well, you’ll be happy to know that most collection agencies
aren’t able to claim your tax refund directly from the IRS.
There are only four types of debt for which the federal government will withhold
your tax refund or send it to one of your creditors.
These debts include past-due federal taxes, state income taxes,
child support payments and amounts you owe to other federal agencies,
such as federal student loans you fail to pay.
As a result, the collection agencies that your other creditors hire
to obtain payment from you cannot intercept or garnish your tax refund.
For example, if you’ve been unable to pay your monthly credit card bill
and the company sends your account to a collection agency,
there is no need to be concerned that they will garnish your tax refund.
However, you should be aware that— depending on the state you live in—
these collection agencies have other ways to obtain payment from you.
State laws commonly allow collection agencies
to garnish your employment wages or levy your bank accounts.
So, once your tax refund is deposited into your bank account,
a collection agency may be able to take those funds.
For example, if you request that your tax refund
be direct deposited into your bank account and a collection agency
is able to levy that account —all of your available funds are
subject to the levy, even if it includes your tax refund.
For more information about this and other tax topics, visit TurboTax.com.