In some states, Michigan being one, a debt collector can garnish your state income tax return to recover a debt. They are unable to touch federal tax refunds, however.

Darlene, of Jackson, Mich., believed she had already paid off her Aspire Visa credit card in 2005, so she was surprised to learn the company had garnished her state tax refund.

“They collected $460 from my state taxes,” Darlene wrote on ConsumerAffairs. “Problem is, they have received their payoff money in 2005 and I sent it to them with no response regarding my payment. Now here we are 7 years later and they are taking my state taxes and saying that I owe them $2313.34.”

To unravel this, Darlene has some work to do. If she doesn't have the cancelled check for her 2005, she will have to contact her bank and get a copy of the record of her payment. If no such record exists, she is out of luck.

Michigan law allows debt collectors to garnish a tax return but also allows taxpayers like Darlene to challenge it. This is much better for Darlene than if she simply tries to argue with the debt collector. By filing an appeal, the court acts as an impartial arbiter.

However, Darlene will have to offer conclusive proof that she paid the debt. To start the process, she should go to the Michigan Courts website and download MC form 49.   

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