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Can my stimulus payment be taken to pay restitution judgments?

Restitution is a court-ordered payment to compensate victims of crime

Summary

A reader is wondering if his stimulus check could be used towards a restitution judgment.

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It seems the coronavirus-induced recession effects are still being felt and a lot of people are anxious about their stimulus checks.

Reader Mark, for one, wrote in to ask if his third stimulus check could be garnished toward a restitution judgment. He says that a restitution recovery center informed him four months ago that his money was going to the IRS. He wonders if restitution judgments are a part of debt recovery.

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How the restitution system works

For those who might be wondering what a restitution payment is, it’s a court-ordered payment that requires those found guilty of a crime to make financial paybacks to victims. Such payments could serve as compensation for matters such as loss of income to the victims, damage to their property, medical expenses they incurred or other such losses to a victim impacted by a crime.

The Department of Justice explains that some financial losses that a victim sustains are not eligible for restitution payments. These include interest payments, fines, state or federal taxes, penalties, expenses related to attorneys’ fees as a result of legal issues brought about by the crime, payments for accountants and tax advisors. You also can’t get restitution payments on account of any “pain and suffering” that you experienced as a result of the crime.

After getting a statement from a victim about their financial loss and going through an investigation process, a judge would issue an “order for restitution” asking a convicted person to reimburse victims for whatever financial loss amount the former is held liable for. They could even begin making the payments while incarcerated by having a portion of their wages taken towards these restitution payments.

See related: How to get your stimulus check faster

Stimulus payments and garnishment

The Internal Revenue Service can use any tax refunds due to you to offset certain delinquent debt payments to government agencies, and government taxes you owe, among others. Since the stimulus payments are an advance tax credit you are receiving, they would be typically be subject to these offset provisions.

However, the Treasury has clarified that stimulus payments received as an advance through the American Rescue Plan Act of 2021, the third stimulus effort that went into effect in March, are not subject to such offset.

For the first round of stimulus payments through the CARES Act in March 2020, Treasury had advised that offset could be applied to take care of any delinquent child support payments. However, those stimulus payments were not explicitly made off-limits to private debt collectors once they hit a consumer’s bank account.

For the second round of stimulus payments that started going out in December, a Treasury code made the payments explicitly off-limits to private debt collectors. They were also not subject to offset by the Treasury.

See related: Can my stimulus check be seized if there is a court order to pay debt? 

Stimulus payments have been used towards restitution judgments

The Trump Administration did not ban payments from the first and second round of stimulus payments going to prisoners. Similarly, the Biden Administration has not outlawed payments to these people.

However, the Internal Revenue Service did try to block these payments to collect back child support from prisoners when the first round of stimulus checks went out. And once the money got to prisons, the authorities could take them toward restitution payments that inmates owed.

Attorney Kelly Dermody of Lieff Cabraser Heimann and Bernstein had initiated a successful class-action lawsuit on behalf of prisoners at that time when the IRS stopped sending them money and even asked for money sent to be paid back.

In the second round of stimulus payments, the IRS could not get hold of the stimulus payments to prisoners. However, they were sent on debit cards and the inmates would have to fill out a tax return to claim the monies. This meant that the stimulus payments were once again subject to be taken towards restitution payments since only the advance tax credit payments were protected from offset.

Similarly, the third round of stimulus payments could be taken toward restitution efforts. The Department of Corrections has clarified this.

See related: Is universal basic income better than one-time stimulus payments? 

Wisconsin bill would allow stimulus payments to go toward restitution

At least one state is contemplating legislation that seeks to divert stimulus payments to prisoners toward restitution efforts. Some Wisconsin lawmakers believe that the money is a windfall for prisoners and should be used to make reparations for their crimes. However, there are others who believe that prisoners could use the money to build up a base for their future lives outside prison.

Mark, unfortunately for you, it seems your stimulus payment could well go toward restitution payments. Although Treasury has barred offsets (if the stimulus money is received as an advance payment), it seems the prison system could still divert the monies toward restitution payments.

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