Your local government collects money for many purposes. Whether it’s parking tickets, licensing fees or property taxes, you must pay the bill or face debt collection. While it makes sense that a city government could ask the Internal Revenue Service to offset your taxes, it’s not legal. As of August 2013, local municipalities do not have access to the federal offset program. Don’t breathe a sigh of relief, though. Local municipalities have other methods to compel debtors to pay.
Internal Revenue Service
The IRS offers a federal treasury offset program that offsets your refund balance to pay certain past-due debts. The TOPs program is available for federal and state governments to collect on debts including student loans, unemployment repayment, past-due taxes and child support. Local municipalities do not get access to the TOPs program to withhold your income tax returns, but that could change in the future. As of publication, a bill is pending in Congress that would allow access to local municipalities.
Many municipalities contract with third-party debt collectors to attempt to collect on past-due bills. Debt collectors are often aggressive in pursuing debts -- because they don’t get paid unless you pay. Phone calls, letters and skip tracing are just a few tactics used by debt collectors to force payment. Debt Collectors must abide by the rules of the Fair Debt Collection Practices Act, which limits the things they can say, when they can call and who they can discuss your debt with.
The local municipality may also force payment by taking you to court. Once a judge issues a judgment in the municipality’s favor, a garnishment order or bank levy may be issued. The local municipality can’t directly take your tax refund, but with a bank levy it can grab it when it hits the bank. The local municipality may also take a percentage of your paycheck each week to pay the debt.
Depending on the type of debt, a bench warrant could be issued forcing you to go before a judge. Warrants are often issued for past-due child support, owing on parking tickets or failure to show up for a civil proceeding. Typically, the judge sets up a payment plan to pay your past-due debt. If you fail to keep up with the payment plan, another warrant is issued to bring you back before the judge.
- TurboTax: Who Can Garnish an Income Tax Refund
- Internal Revenue Service: Topic 203 - Refund Offsets: For Unpaid Child Support, And Certain Federal, State, and Unemployment Compensation Debts
- Internal Revenue Service: Tax Refund Withholdings and Offsets
- Congressman Jim Moran: Moran Introduces Bill to Help Collect Unpaid Local Taxes
- Federal Trade Commission: The Fair Debt Collection Practices Act
- Star Tribune: In Jail for Being in Debt
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