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If Your Refund is Held/Offset to Pay a Debt

If Your Refund is Held/Offset to Pay a Debt

How to Serve A Garnishment

The Michigan Department of Treasury withholds income tax refunds or credits for payment of certain debts, such as delinquent taxes, state agency debts, garnishments, probate or child support orders, overpayment of unemployment benefits and IRS levies on individual income tax refunds.

Why is My Refund Being Held?

The Michigan Department of Treasury may apply income tax refunds or credits to an unpaid debt. For more information, select one of the following options:

 

Refund Withheld for Payment of Delinquent Tax or State Agency Debt

Refund Withheld for Payment of a Garnishment

 

What Happens to My Refund or Credit if it's Held to Pay a Delinquent Tax or State Agency Debt?

If you have unpaid past-due taxes or a state agency debt, the Michigan Department of Treasury is authorized by Michigan law to offset your income tax refund or credit to apply to the debt until the debt is paid in full. This includes debt(s) currently on a payment plan. Read more about Income Allocation for Delinquent Accounts.

If all or part of your income tax refund was taken to pay a debt that you owe the State of Michigan, you will receive a Notice of Adjustment to Income Tax Refund letter that provides you with detailed information about your refund. If your refund is more than the amount you owe, Treasury will refund the difference to you.

In the event that only one spouse is liable for the debt and you filed a joint income tax return you will receive a Notice of Hold on Income Tax Refund or Credit letter with an Income Allocation for Non-Obligated Spouse form to complete and return within 30 days from the date on the accompanying letter to the Michigan Department of Treasury. Read more about Non-Obligated Spouse.

Updates may be obtained by using the Check My Income Tax Info site.

For specific information about your account and the debt owed, contact the Office of Collections at 517-636-5265.

What Happens to My Refund or Credit if it is garnished?

The Michigan Department of Treasury, Third Party Withholding Unit, receives and processes garnishments, probate orders, child support orders, overpayment of unemployment benefits and IRS levies on individual income tax refunds under the authority of Public Act 211 of 1985. Treasury is required to provide notice to taxpayers before withholding individual income tax refunds or credits for payment of a debt. It could take up to 18 weeks longer to process a refund with a garnishment than it does a refund that has not been garnished.

A garnishment is a legal process executed through a court order in favor of the creditor (plaintiff). Treasury withholds tax refunds or credits of the individual (defendant) to pay a debt owed to the creditor. If your individual income tax refund is held as a result of a garnishment, the State has received notice of the judgment against you and is required to withhold (offset) your income tax refund or credit to satisfy the debt.

Prior to Treasury holding your income tax refund or credit, you should have received notification from the creditor who brought the case before the court. This notification is in the form of the defendant's copy of the "Request and Writ for Garnishment (Income Tax Refund/Credit)". See Example of Form.

There are several steps involved in handling a garnishment, including Treasury's determination of the amount, if any, of the refund to be returned to the taxpayer. The process, from start to finish, can take up to 18 weeks longer than non-garnished refunds, due in part to legal requirements. (Home Heating credits are Federally funded, and are not subject to garnishment.)

What is the Garnishment Process and Why Does It Take So Long?

When the State receives a garnishment order, it is matched with income tax return information and the refund is held for possible offset. Treasury mails the taxpayer a notice of the pending offset. The kind of notice received and the time it takes to issue any remaining (residual) refund depends on filing status, method of filing (e-filed or mailed return), any reviews that occur in normal processing of the return and time-frames for response and actions that are required by law.

Residual Refunds

If there is a debt that is owed to the State of Michigan either from a tax liability or a Third Party Garnishment that is only the responsibility of one of the taxpayers who file a joint return, the Michigan Department of Treasury will release a portion of the tax refund through the Residual Refund process. This process also applies to Single Filers as well.

Single filers: If part of your refund is being applied to a debt owed to the State of Michigan, either for a tax liability or a third party garnishment, any remaining portion of your refund (residual refund), not subject to a debt will be refunded to you within 7-10 business days.

Joint filers: Your residual refund may take up to 2 months longer. You will first receive an Income Allocation for Non-Obligated Spouse Form (743) personalized with specific information from your return. This form must be completed and returned to Michigan Department of Treasury within 30 days of receipt to allow the non-obligated spouse to claim their portion of the refund, if any.

Garnishment Timeframe(s)

Single Filer

(May Take up to 12 Weeks after the Return Is Released from Normal Processing)

Step 1.

After return is released from normal processing refund goes to Department of Treasury's Third Party Garnishment in the Office of Collections for processing

Step 2.

Allow 8 more weeks

  • Treasury's Third Party receives court ordered garnishment release.
  • Taxpayer receives "Notice of Income Tax Refund Used for Debts" and a "Garnishment Disclosure". These documents describe
    • Type of debt
    • Amount of the refund to be withheld
    • Name
    • Address and
    • Phone number of the plaintiff (creditor) and
    • Court where the garnishment was filed
  • The taxpayer has up to 28 days from the date of the "Garnishment Disclosure Notice" to provide Treasury with proof from the court that the garnishment has been resolved. For more information, see How to stop a garnishment.

Step 3.

Allow 4 more weeks

If the taxpayer (defendant) does not provide Treasury with proof from the court that the garnishment has been resolved,

  • Payment is issued to the plaintiff (creditor) and
  • The remaining refund, if any, is released to the taxpayer

Married/Joint Filer

(May Take up to 20 Weeks after the Return Is Released from Normal Processing)

Step 1.

Allow 4 weeks

 After return is released from normal processing, refund goes to Treasury's Third Party Garnishment in the Office of Collections

  • Taxpayer receives "Request for Income Information Notice"  and
  • "Income Allocation for Non-Obligated Spouse" (NOS Form-743).  The form allows joint filers to separate income by spouse.

The NOS form comes with preprinted information coming from the tax return or credit claim

  • Income must be entered on the form and the total of both incomes must be equal to the amount reported on the income tax return/credit claim. 
  • The form must be returned within 30 days of the date on the "Request for Information Notice". 

NOS forms are not available prior to submission or in initial review of the return

Step 2.

Allow 8 More Weeks

  • Treasury verifies and processes the NOS Form-743  

Step 3.

Allow 4 More Weeks

  • Treasury receives "Court Ordered Garnishment Release"
  • Taxpayer receives "Notice of Income Tax Refund Used for Debts" and a "Garnishment Disclosure"
  • These documents describe:
    • Type of debt
    • Amount of the refund to be withheld
    •  Name
    • Address
    • Phone number of the plaintiff (creditor) and
    • Court where the garnishment was filed
  • The taxpayer has up to 28 days from the date of the "Garnishment Disclosure" Notice" to provide Treasury with proof from the court that the garnishment has been resolved. For more information, see "How to stop a garnishment"

Step 4.

Allow 4 weeks

If taxpayer (defendant) does not provide Treasury with proof from the court that the garnishment has been resolved,

  • Payment is issued to the plaintiff (creditor) and
  • The remaining refund, if any, is released to the taxpayer
     

How Can I Stop a Garnishment?

If you disagree with the garnishment of your tax refund or credit, we encourage you to seek legal representation or advice. Reasons for disputing the garnishment may include:

  • the debt is paid in full
  • you believe you don't owe this debt
  • the debt was discharged in bankruptcy court

For Treasury to release the garnishment on your income tax refund, we must receive one of the following court-validated documents prior to issuing payment to the plaintiff/creditor or their attorney. You may obtain these documents from the creditor, the creditor's attorney or the court.

  • MC-51 Order on Objections to Garnishment: Accepted by Treasury only if it releases the full refund amount offset. Treasury cannot process partial payments.
  • MC-50 Garnishment Release: A garnishment release issued by a circuit or district court requires Treasury to release a refund offset to the taxpayer.
  • MC-17 Certificate of Satisfied Judgment: This form is issued when the debt has been paid in full (satisfied).
  • Bankruptcy Documents:  If you are currently in bankruptcy proceedings, provide a Notice of Chapter 13 Bankruptcy Case (Form 309I) or Notice of Chapter 7 Bankruptcy Case (Form 309A). Once bankruptcy has been discharged, the State of Michigan can no longer accept "Proof of Bankruptcy". The State of Michigan must have a court Validated Release, form MC50.

Contact Information

If you have questions regarding a garnishment of an individual income tax refund or credit, contact the following resources for additional information:

  • Contact the Plaintiff (creditor) or Plaintiff's Attorney (this information is available on the "Request for Information" and "Notice of Income Tax Refund Used for Debts" notices.)
    • For information regarding the debt
    • For proof that the debt has been previously released or satisfied
    • If the amount of the debt is in question
    • If you are not the person listed as the debtor (defendant)
    • To make payment arrangements to secure a garnishment release
  • Contact the Court (this information is available on the "Request for Information" and "Notice of Income Tax Refund Used for Debts" notices.)
    • To file an objection (MC-49) and request a hearing
    • To question the legality of the garnishment
    • If you were not informed or served a copy of the garnishment by the plaintiff or plaintiff's attorney
  • Contact Treasury For Refund Status information:
      • Treasury's "Check my Income Tax Info" website is the quickest way to check the status of your refund. You will need to have your name, social security number the tax year; filing status and either the adjusted gross income or household income for that year. Or call 517-636-4486.
      • For payment status, i.e., if the refund has been sent to the plaintiff or plaintiff's attorney, call 517-636-5333.
      • If you have obtained a Garnishment Release, Satisfaction of Judgment, or your debt was discharged due to bankruptcy, call 517-636-5333 or you can fax it directly to the Third Party Withholding Division at 517-636-5349.  Be sure to include a daytime phone number where you can be reached in case they need to contact you for further information.
      • For questions regarding Treasury's Income Allocation to Non-Obligated Spouse form (NOS Form-743), call 517-636-4486 or 517-636-5333.

The Michigan Department of Treasury is unable to provide any legal advice on debt(s) that you may have with a creditor who has issued a garnishment. For legal advice, contact an attorney.

Other Useful Information / Additional Resources