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IRS to Return Some COVID-19 Stimulus Funds Seized for Child Support

The coronavirus pandemic has caused significant financial difficulties for most of the country. While the stimulus checks approved by the HEROES Act were intended to help relieve some of this stress, not everyone received the check. For example, people whose wages were subject to garnishment may have never seen their stimulus checks in the first place.

This didn’t just affect individuals, however. In the case of people who owed back child support, their checks were seized to cover the owed amount. If the person who owed money was married, their spouse’s check was also taken. Of course, this was immediately decried as unfair and unlawful.

In Oregon and most other states, child support is considered a “separate debt,” meaning that both married partners do not share it. If one partner owes child support, their spouse cannot be held liable for their debts. Unless the state is a “community property” state, creditors – including the federal government – can only go after the income and belongings of the person who owes the debt.

It took time, but the IRS has finally conceded that point. People whose stimulus checks were garnished for their spouse’s child support debts will finally be receiving their funds this month. Fifty thousand people will finally receive the money that should have been paid months ago.

While this case is being resolved, it has brought the practice of wage garnishment for child support into the limelight. Understanding what can be seized to cover unpaid child support is essential for everyone connected to the system. Whether you’re owed child support, owe it, or you’re married to someone who owes or is owed support, understanding the options will help you navigate family law more effectively.

What Can Be Seized for Child Support Payments?

Oregon and the federal government both take child support payments seriously. These court-ordered support payments are more thoroughly enforced than almost any other debt. That’s because the debt is put in place by a government official and designed to support minors. Because of this, without a renegotiation of the child support order, the government finds it in the state’s and child’s best interest to ensure payment.

There are several ways that this is done. Owing child support can lead to serious changes in income, so knowing what may be seized can help you plan if you’ve fallen behind.

Wage Garnishment

Also known as income withholding, wage garnishment is the most well-known form of child support asset seizure. Wage garnishment may occur even if someone hasn’t fallen behind on their payments. In this case, the person’s employer is notified that their employee owes child support and is told how much to withhold. This money is then sent to the custodial parent without ever reaching the paycheck.

Wage garnishment can be requested by the child’s custodial parent, even if the non-custodial parent hasn’t fallen behind. In this case, the garnishment can be up to 25% of your net income. However, if you’re behind on payments, the garnishment can be increased to 50% of your net income until owed support is paid.

Other Income Garnishment

Your paycheck isn’t the only income that can be garnished. Any payment can be subject to garnishment, including lottery winnings, inheritances, and insurance settlements. This means that if you receive any money from these sources, the state can intercept money from the paying organization before it reaches you.

Some types of insurance settlements are exempt from garnishment, such as certain types of health insurance settlements. However, this varies depending on the circumstances. If you are concerned about necessary funds being garnished, reach out to an experienced family law attorney to discuss your situation.

Tax Refund

Tax refunds are frequently intercepted as a form of garnishment. This is the case for both federal and state tax refunds. The entire refund is subject to interception, unlike wages. This can be a good reason for married spouses to file taxes separately.

When spouses file taxes jointly, the entire tax return may be subject to interception. This tax return may be partially recovered if the spouse who doesn’t owe child support files an “Injured Spouse” form. This informs the state that the refund should be divided and, in part, returned. Filing taxes separately can avoid this because the couple will receive two returns. The partner who doesn’t owe child support can then receive their return without a problem.

Asset Seizure

In Oregon, child support agencies can seize a variety of assets to help enforce child support orders. Retirement funds, checking and savings accounts, and any other financial institution accounts can be taken to cover back child support. Even certain kinds of benefits can be seized. This can also seriously affect married couples because many retirement and savings accounts are under both partners’ names.

Property Liens

Finally, while child support agencies cannot physically seize vehicles or real property, they can place a lien on these assets. While the person who owes child support will retain ownership of the real estate or vehicle, they may not sell it. To sell any real estate or vehicle with a lien on it, the owner needs to pay off the lien amount fully. Otherwise, the title can’t be easily transferred, and the sale can’t be completed.

Child support orders can also be enforced in a number of other ways. In particular, judges can:

  • Suspend the non-custodial parent’s passport
  • Suspend the non-custodial parent’s license
  • Report the non-custodial parent to credit agencies
  • Place the non-custodial parent under contempt of court for failure to pay

Failure to pay owed child support is a serious problem. It doesn’t just affect you – it affects your child, your former partner, and potentially your current partner as well. If you are struggling to make ends meet with a child support agreement, don’t hesitate to reach out for help. A qualified family law attorney can help you understand your options and potentially renegotiate your child support payment into something you can manage.