Garnish Tax Refund Student Loans

How do I refund my student loans?

For information about what types of taxes or payments may be eligible for a tax refund, contact the IRS at 1-800-829-1954. If you make less than $10,000 per year, you may qualify to receive a refund. To apply, file your 2013 Federal income tax return by April 15, 2014. You may be able to claim a refund if you have any federal tax liability.

What is the Garnishment Tax Refund?

The Garnishment Tax Refund was designed to help people who had their pay garnished due to child support obligations. Under the Child Support Recovery Act (CCRA), employers commonly withhold 10 percent of earnings to satisfy existing court orders. Most states allow them to garnishee wages without prior notice. In some cases creditors seize a portion of nonwage income such as Social Security checks or retirement accounts. However, Congress passed legislation allowing individuals to reclaim this money back. The CCRA gives taxpayers the option of filing a garnishment application with the Internal Revenue Service to recoup funds seized by creditors.

Is it true that I get a full refund?

No, the IRS only provides partial relief to those who owe over $500 in past due child support. If the amount owed is less than $500, you will not be eligible for a refund. This program only covers current federal income taxes.

Do I need to fill out any forms?

You do not have to complete any forms in order to claim a Garnishment Tax Refund. Just send us copies of the following documents along with your W-2 Form.

Your 2013 Federal Income tax Return

Your 2013 Wage Statement

Any document showing the amount of child support being collected

We will review the application and determine whether or not we will approve your request. We then notify you of our decision. Please note that refunds will take approximately 6 weeks to issue.

Garnish Tax Refund Student Loans

How much do I owe?

If you have borrowed money from any type of loan, federal student loans included, you may be eligible for a tax refund. You owe a certain amount of taxes each year based upon your adjusted gross income (AGI). If your AGI is less than $80,000, then you generally owe no more than $1,500 in taxes per year. However, if your AGI exceeds $80,000, you may owe more than $1,499 in annual taxes. If you owe any taxes due to a previous year’s refunded loan, you will not receive another refund for that year. There is a limit to how many refunds can be issued over the course of 10 years.

What if I file late?

Generally speaking, filing late means losing out on the interest on what was owed. Any interest lost cannot be recovered in a subsequent year. So, if you file after October 15th, you lose interest for the entire year. But, even though some people may think you should get the full tax refund you were promised before October 15, you don’t actually gain anything by filing early. In fact, you could actually end up owing more money than you would have owed had you filed at the appropriate time.

Can I just pay my taxes now?

No! That is not how it works. Once you make payments on the loan, the IRS does not consider them taxable income until you actually file your return. Even if the money is sitting on your W-2, it still remains taxed. Also, if you are using a payment plan, you must continue making those payments until the return is processed by the IRS.

Will I get penalized?

The worst thing you can do is try to fake your way out of paying back what you owe on the loan. You could get audited and face severe penalties for fraud.

Garnish Tax Refund Student Loans

Why do we have student loans?

Student loans help students afford college tuition costs. In return, they receive either federal aid or private funding for education. However, many people who take out student loans do not graduate or complete their schooling. This means that they end up paying back the loan plus interest, which can add up over time.

How does garnishing tax refunds work?

Tax refund claims are filed using W-4 deductions, which indicate how much of a person’s paycheck is allocated for taxes. Federal law requires employers to withhold taxes at a rate of 25 percent of wages, except for certain exemptions. These exemptions include money paid to charity, unemployment insurance payments, Social Security payments, alimony, and child support. If a taxpayer doesn’t file a W-4, the employer could use these funds to pay off debts, including student debt.

Will I get the maximum amount if my federal income tax was withheld correctly?

Yes! Under the Internal Revenue Code, any amount above $10,400 per year ($14,800 per married couple) may be subject to taxation. A taxpayer should claim the full amount on his/her yearly tax return.

What happens if I don’t claim enough?

If you fail to claim enough, you’ll owe additional taxes. You can avoid this situation by claiming the correct amount each year. If you’re eligible for both the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), you can file a joint return in order to qualify for a larger refund.

Can I still get a refund after filing for bankruptcy?

You can still apply for a refund even if filing for Chapter 13 or Chapter 7 bankruptcy. Bankruptcy only affects future earned income. Your past earnings are preserved through the bankruptcy proceedings.

Does garnishment affect me if I’m not legally obligated to pay student loans?

No. Garnished funds may not be returned to you, but they remain protected until you repay them.

When can I expect a refund?

The IRS states that most people should receive their refund around April 15, but some may wait longer. Students should check with their school’s financial aid office to find out exact dates.

Garnish Tax Refund Student Loans

Interest Rates

Interest rates started at 6% in August 2008 and have been gradually increasing ever since. As of now, interest rates range between 4%-8%. There is no set time limit on how long the rate stays at a certain level, however, most economists believe they will stay relatively stable until 2014.

Amount You Earned

The maximum amount of student loan debt that anyone can carry is $23,500 without being considered delinquent or defaulting on their payments. In order to qualify for a tax refund, you must make at least 10 monthly payments on any outstanding loans, which includes paying off all principal plus interest. Payments must be completed before filing your return and cannot be applied to anything else besides what was owed on Jan 1, 2010. If you do not make enough to pay off all of your loan(s), you may qualify for a partial tax refund depending on the amount of money you owe. Your refund amounts would vary based on your payment history, therefore, the only way to know if you will receive a refund is to file your federal income tax return.

Amounts Owed

For those who have student loans, the total amount of money owed is around $12,000. If you have any type of education loans, they are often referred to as Federal Direct Subsidized Loans (Stafford) or Federal Direct Unsubsidized Loans (Direct PLUS). Stafford loans are subsidized by the government if the borrower has little-to-no income from other jobs and work full-time while attending school, otherwise they are unsubsidized. Direct PLUS loans are unsubsidized and offer a higher annual percentage rate than Stafford loans.

Garnish Tax Refund Student Loans

I want to show you how I am using my garnished student loan refund to pay off student loans. As a 22-year old college graduate, I have been working professionally since graduating. I’ve built a career for myself as a graphic designer and illustrator. I currently work full time at a design firm in Los Angeles. My job  is Graphic Designer, Illustrator, Art Director, etc.

My employer pays me an hourly rate, which varies depending on the project I’m working on at any given moment. Sometimes it’s $20 per hour, sometimes it’s $50 per hour. Whatever the case, I always make sure to get paid well for my work.

As my income increases, my monthly expenses do as well. We spend money on rent (a 1 bedroom apartment), utilities (water, electricity, internet, cable), car insurance, groceries, gas, food, clothing, etc. There’s no way around this stuff!

However, we are fortunate enough to live debt free. We don’t own a house, we don’t have auto payments, we don’t have credit card bills. Instead, we have a budget for everything. We set aside money for the basic necessities, then we have money left over. After paying for our monthly obligations, we put whatever is left over into savings.

Once we reach a certain amount of saved money, we start investing it. We recently invested $10,000 into a Roth IRA. That was fun, although not easy. It took some research, planning, and discipline to find the best possible investment based on our financial situation. Once we decided what we wanted to invest in, we opened a brokerage account and started putting money in. The whole process wasn’t hard. In fact, once we got past the initial learning curve, the rest was pretty simple. Now, we’re sitting on about $15,000 in cash. Which leads us to today’s video…

What if we could use that $15,000 to pay down our student loans? Wouldn’t that be awesome?! Well, here’s what I did…

Step 1: Calculate What You Need Each Month

Before we go any further, let’s take a look at our current monthly expenditures. First, I need to figure out exactly how much I earn each month. To do this, I’ll calculate my monthly net pay first. Then I’ll add on my monthly tax bill. If my tax bracket is 40%, then I would add 2/3 of my taxable income to this total. Next, I’d add on anything else we might be spending money on beyond taxes and rent. This includes things like utilities, groceries, gas, and eating out. All of these expenses will be added together and then divided by 12, giving us a rough idea of how much we should be spending on average each month.

So, let’s say I’ve calculated that my monthly net pay is $700. I’d calculate my monthly taxes at 20%. So after adding those two numbers, I get $945. The last thing I’d add to the equation would be my average monthly spending, which comes out to be $500. So dividing those three figures gives us the following:

$700 + $945 ÷ 12 $500

Now that we know the exact number, we can now calculate how much money we need each month to cover all of our spending. Since we want to pay down our student loan balances, I’d subtract my loan payment from this number. Here’s how I’d break down my calculation:

$500 – $200 $300

The first step to managing your finances is determining how much money you need in order to cover monthly bills. I hope this helps you in doing just that!

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