The question that everyone asks is: “How will you know if your stimulus check was actually garnished?” The IRS has access to bank account information, but you don’t have to give them yours if you prefer paper checks. While the stimulus payments were created to lessen the financial impact of the coronavirus outbreak, they were never intended to pay off credit cards or other debts.
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Paper checks are an opportunity to avoid garnishment
The U.S. Postal Service allows recipients to forward their paper stimulus checks. Once you receive your third-round stimulus check, make sure to keep it in a safe place because the IRS will have a record of your transaction. If you change your mailing address recently, you may have to wait longer to get your paper payment. Alternatively, you can authorize the U.S. Postal Service to send your stimulus check to a different account. Either way, the payment will arrive in your mailbox eventually.
If you are concerned that your debt collector may try to seize your stimulus check, consider the CARES Act. This law protects you from garnishment of government funds that are meant to aid American families during this pandemic. It prevents creditors from taking advantage of this opportunity to collect unpaid state or federal debt. This includes child support, but it does not cover other debts. A negative balance on your account means that the IRS has the power to garnish your stimulus payment.
Banks are concerned about fraud involving paper checks
There are several ways to protect yourself against fraudulent use of paper stimulus checks. For one, you should never send money up front to anyone claiming to be from the government. Whether you are receiving your check in the mail or through a sham email, you should never share your social security number, bank account number, or credit card information. Scammers use these methods to take advantage of people in desperate need of money.
To prevent such fraud, switch to electronic payments or direct deposit. Paper checks are not only difficult to trace, but also may be stolen, or sent to the wrong address. Additionally, they may be subject to check fraud and check cashing fees. Banks are concerned about fraud involving paper stimulus checks, and they are taking action to prevent it. However, while switching to electronic payments or direct deposit will enable you to receive your stimulus payment faster, it may also leave you vulnerable to check fraud.
Exempt funds may be exempt from garnishment
Many banks will automatically offset your third stimulus check with fees or money you owe to the government. However, some community banks may not. You can object to the garnishment and seek a temporary overdraft waiver. If the garnishment is the third stimulus check, it is unlikely the government will grant you such a waiver. However, if it is the first or second stimulus check, you can object to the garnishment.
In addition to federal regulations, there are other state laws that protect your stimulus payments. If you live in Maryland, for example, the Governor has signed an Emergency Order exempting payments from garnishment. However, some private companies will still be able to garnish your checks. For this reason, it is important to protect your money before it is garnished. If you believe your payment is in jeopardy, you should take action right away.
Tax debt, government debt and private debt can be garnished
Wage garnishment is one way that creditor’s can collect unpaid debt, based on the amount owed. IRS, state and private debt collectors must follow federal and state laws to avoid garnishing your wages. Usually, this process is used to settle large, unpaid debt. If a debtor can’t pay off the entire debt, the collection agency may work through his employer. When a wage garnishment is attempted, the employer must withhold a certain percentage of your disposable income. Disposable income is the money that remains in your paycheck after taxes and mandatory charges for Social Security.
The IRS can levy wages and other property to collect a debt. It will send multiple notices to you, with the first notice seeking payment. The final notice will inform you of a potential wage garnishment and a CDP hearing, at which you will be able to dispute your tax debt and discuss payment options. While these actions may be intimidating, don’t panic! If you have a tax refund coming in the mail, it’s a good idea to make sure it isn’t subject to garnishment.
