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How to Stop Child Support from Taking Tax Refund

How to Stop Child Support from Taking Tax Refund 2022-2023

How To Stop Child Support From Taking Tax RefundHow to Stop Child Support from Taking Tax Refund: The best way is to stay current, but there are things you can do to minimize a tax seizure. If you fall behind on child support payments, the government will make every effort to collect them. This includes garnishing your salary as well as confiscating your tax refunds. However, there are steps you can take if you are delinquent.  For example, you can contact your local Department of Child Support and Enforcement (DCSE) office to file an appeal, Or, you can set up a payment plan for your outstanding payments, and request a hearing.  These options can at least delay the state and federal governments from seizing your tax refunds.

The Treasury Department’s Financial Management Service division will notify you of an anticipated tax refund seizure before it occurs. You can take advantage of this opportunity to decide on a course of action.  Acting quickly, you may be able to reduce the impact of the seizure on your finances. Of course, paying child support on time is the best method to prevent an IRS Tax Refund Seizure. Maybe, you have lost your job or have pressing circumstances that impact your ability to make payments on time. For assistance, contact your local child support agency and explain the situation.  Or, return to court to see if you may reduce child support based on your current income. Do not simply ignore your child support duty.  Failing to make timely payments can result in contempt of court actions, fines, and other punitive measures.  For instance, Child Support taking your tax refund.

How can Child Support Take my Tax Refund?

The federal tax refund offset program began in 1981.  It allows the IRS and state tax authorities to confiscate your refunds in order to pay late child support. When the IRS intends to seize your return, it will notify you in advance that your refund is on the list to be seized. If you owe less than your estimated refund, the IRS may only keep that portion of it. However, the IRS may have an outdated address on file. In that instance, you may not be notified of their intention to confiscate your return in a timely manner. Even if you do not get the notification, the IRS has the authority to collect it.

Treasury Department Offset Program

State child support enforcement agencies communicate information with the Treasury Department.  This includes information about parents who are delinquent on child payments under the federal Treasury Offset Program. Using this guidance, the agency can intercept federal tax returns and other payments in order to balance unpaid child support. Your state child support enforcement office will report your unpaid child support to the Treasury Department.  In turn, the IRS will deduct the arrears from your tax refund, often called a tax refund seizure. The money will subsequently be transferred to the proper child support agency by the IRS. The same is true for coronavirus stimulus payments.

The Treasury Offset Program (TOP), operated by the Department of the Treasury’s Bureau of the Fiscal Service, is a fully-automated, centralized offset program that intercepts federal and state payments to collect delinquent debts owed to federal and state agencies. Federal agencies must notify TOP of all nontax debts delinquent for more than 120 days. Federal disbursing officials must offset payments to collect such debts. States may offset their payments by entering into reciprocal offset agreements. The Internal Revenue Service (IRS) levies TOP to collect federal tax debts, at its discretion, under separate legal authorities from those authorizing administrative offset. (Source: treasury.gov)

How to Stop Child Support from Taking Tax Refund – Ways to Protect your Tax Refund

Taxpayers sometimes ask how to stop child support from taking tax refunds.  The best way to avoid receiving a notice of an IRS Tax Refund Seizure is to pay child support on time.  Once you have fallen behind, there are still steps you can take to catch up and protect your tax refund.

Steps you can take

  • Pay up the amount due – If you fall behind on your child support payments, the government will withhold your refund. The best way to ensure that they do not grab your refund is to be caught on your support payments.  Be sure to catch up well ahead of your scheduled tax refund processing date.
  • Contact Child Support – The Division of Child Support and Enforcement (DCSE) is responsible for collecting child support.  However, they will hear appeals or good cause reasons for being in arrears. Good cause reasons to change child support include losing a job, the other parent getting a significant raise, or the disability of the paying parent.
  • Establish a payment plan – Payment plans allow you to catch up on late payments over time, but interest will be charged. However, if a payment plan is in place your refund will not be confiscated. Provided, of course, you stay up to date on your payments.
  • Request a hearing – DCSE may not confiscate your tax refund if you have a pending request for a hearing. The hearing will allow you to state your case for being overdue on your payments.  You will need to inform them of your plan for catching up. You may also share the reasons why you require your tax refund.
  • Optimize your withholding –  Adjusting your income tax withholding will have no effect on your current tax return offset.  However, it can offer some protection from future offsets. With a smaller proportion of withholding income, you can keep more money during the year.  Potentially, you will be ineligible for a tax refund and hence not subject to any tax refund offset. However, you should exercise caution as you may end up owing the IRS a lump sum payment at tax time.

What to Do If You Receive Notice of an IRS Tax Refund Seizure

The Treasury Department’s Financial Management Service division will notify you of an anticipated tax refund seizure before it occurs. Take advantage of this opportunity to prepare for the potential tax refund offset and decide on a course of action.  You may be able to reduce the impact of the seizure on your finances. Paying child support on schedule is the surest method to prevent receiving a notification of an IRS Tax Seizure. There are many legitimate reasons people fall behind on their support payments. You must take action if you have lost your job or are having difficulty making your payments on time.

For assistance, contact your local child support agency or return to court.  They will fairly consider if you may reduce child support based on your reduced current income. Ignoring your child support duty or failing to make timely payments can result in other financial implications.  These include contempt of court actions, fines, and other punishments.  For example, the seizure of your tax refund or coronavirus stimulus payments.

Does Delinquent Child Support Affect My Other Finances?

Delinquent child support can harm your income in a variety of ways.

  • Contempt of court charges – If you willfully refuse to make payments, you may be held in contempt and imprisoned, reducing your earning ability.
  • Garnished wages – If you are working, DCSE may garnish your wages.  This means they will deduct a percentage or a fixed dollar amount from each of your paychecks.
  • Reports to credit bureaus – Delinquent child support payments may be reported to credit bureaus.  This may lower your credit score and your ability to acquire a loan.

You can adjust the amount of child support you pay by requesting the court to amend your support agreement. You also bargain with the child’s other parent in order to file a change motion.

How to Stop Child Support from Taking Tax Refund- FAQs

The IRS receives information from each state’s child support agency on delinquent accounts. The IRS prepares a list of delinquent accounts and notifies everybody whose refund is about to be seized.

Can child support agencies seize my advanced child tax credits or state tax refund?

Advance child tax credit payments were issued throughout the second half of 2021 under the American Rescue Plan. The payments were not subject to confiscation by the government for late child support under this measure. It is unclear whether the IRS will resume advanced child tax credit payments in the future or whether they will be seized. However, states can confiscate your state tax refund to pay delinquent child support. Just like the IRS can pass on your tax refund to the DCSE to make outstanding child support payments. The restrictions differ from state to state, so check with your state government. Although the regulation differs by state, most jurisdictions send out notifications before confiscating a tax return for delayed payments.

Do child support agencies always seize tax refunds if you have delinquent child support?

Due to the COVID pandemic, the IRS stopped seizing tax refunds in 2020 and 2021. This is the first time they have stopped seizing refunds for unpaid child support payments since 1981. It is unknown whether they will continue to give a waiver in the future. During this time, many states also stopped seizing tax returns to pay back child support arrears.  However, the length of time each state paused its program of seizing refunds varies.

Are child support payments tax deductible?

The payment or receipt of child support is not a taxable event. Child support payments are not tax deductible for the person making them. They do not provide income to the person receiving child support. Alimony payments, on the other hand, are deductible for agreements entered into before January 1, 2019. Divorce and separation agreements should distinguish between child support and alimony payments. The amount of child support you pay or receive is unrelated to claiming a child on your tax return as a dependent.

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