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Keep Your Tax Refund from a Federal Tax Intercept

Taxpayers around the country got an extension on filing taxes in 2020 due to the COVID-19 pandemic. If you have been making plans around what you’ll do with this years’ refund, but you have defaulted on your federal student loans, you might not receive the deposit to your bank account after all. At Castagliuolo Law, we have experience in the legal aspects of student loan debt and can help you get your payments back on track.

What is a Federal Tax Intercept?

The Bureau of Fiscal Service is authorized by Congress to conduct the Treasury’s Tax Offset Program. This program can take part or all of your refund and channel it to particular creditors, including your student loan servicer. However, they cannot do this unless your loan holder has notified you. Federal student loans enter default if you miss 270 days (approximately nine months) of payments. You’ll receive a letter from the servicer if your account has been referred to the Treasury Department or TOP for garnishment.

Can I Stop Refund Garnishment?

If you have missed several months of payments and receive late notices, now is the time to start thinking ahead. Stopping a Federal Tax Intercept is not easy, and you need to take action before filing your returns. As with most legal processes, it begins with the preparation of several documents. An attorney with training in Student Loan Law can help you develop a strategy that may include:

  • Loan consolidation
  • Rehabilitation
  • Changing your payment plan

Several factors affect the steps you take, such as:

  • Income type and source
  • Alimony/Child support
  • Marital status

Does the Intercept Affect My Spouse?

The short answer is, “Not necessarily.” If your spouse’s income is such that part of the refund is theirs, he or she can file an Injured Spouse form with the IRS. This allows them to receive a proportional amount of the return. However, you should note that this is somewhat discretionary on the part of the IRS. If you don’t file taxes jointly, the chances are good that your spouse’s refund will not be affected.

Schedule an appointment with Constagliuolo Law to discuss your unique situation and learn more about how to avoid tax intercepts, determine if bankruptcy is right for you or if your credit card company is suing you for non-payment.

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