What Can I Do When I Owe Taxes, Court Debt or Other Debts to the State of Iowa?
Authored By: Iowa Legal Aid
You cannot register your car. Your operator, hunting, or professional license has been suspended. The state is garnishing your wages or bank accounts. The state is offsetting benefit payments and tax refunds.These are all signs that you may owe money to the state of Iowa. If you owe the state of Iowa for certain kinds of debts, your license may also be suspended.
There are many kinds of debts that you can owe the state. These include:
- Unpaid taxes
- Unpaid court costs or fines from civil, juvenile or criminal cases
- Overpayments of state benefits like unemployment, FIP, etc.
If you owe money to the state, you will receive a notice. Do not ignore this notice. It is important for you to know how much you owe, why you owe it, and what state agency you will be dealing with.
The state can do things that normal creditors cannot. The most common of these is suspension of licenses or car registration. This includes drivers’ licenses as well as hunting, fishing, and professional licenses. The state can also garnish wages, levy on accounts, and offset some state benefits.
Can the state garnish my wages to pay off the debt?
Yes, but within certain limits. The Iowa Department of Revenue and (sometimes a county attorney) can garnish a certain amount of your wages or a bank account to pay off the debt. For taxes, the state can theoretically garnish 100% of your wages. However, they will often accept a reasonable payment plan instead of such an extreme measure, if you request one.
For court debt and other state debt, the state can garnish the following amounts:
Weekly Disposable Wages
Weekly Maximum Garnishment
Less than $217.50
$217.50 to $290.00
Your disposable wages minus $217.50
More than $290.00
25% of your disposable wages
Disposable wages” is your pay after any withholdings required by law. Other things may affect how much the State can take, such as whether you have prior garnishments or are paying child support.
Can the State take my federal benefits?
The state cannot take federal payments such as SSI, SSD, Social Security, and several similar federal benefits. The only exception to this is that if you owe state taxes, the State can sometimes offset your federal tax refund.
Can the State take my state benefits?
The State may try to "offset" certain state benefits or payments against any State debt you may have. "Offset" means reducing your benefits to pay what you owe. These State payments include FIP, rent reimbursement, DHS payments for child care, or even gambling winnings. Finally, the state has agreed not to offset DHS payments for childcare at this time.
Even if you have a payment plan, the state of Iowa can still take a part of your state tax refund to pay on a state debt.
Unless the debt to the State is for taxes, many of these payments are "exempt income" (that is, the State is not allowed to take them). Before the payments are offset, you will receive a notice. The notice is required by law to tell you how to appeal the offset. In your appeal, you should gather evidence to show that your income is exempt. If you would like advice or other help with such an appeal, you should call Iowa Legal Aid to see if you are eligible for assistance.
How can I get them to let me renew my car registration or my driver’s license?
In order to get your registration hold lifted, and to stop offsets, levies and garnishments, you will have to enter into a payment plan. Payment plans should be based on your ability to pay.
If your driver’s license is suspended, you can enter into a special kind of payment plan with some county attorneys. This can be a county attorney in the county where you live, or the county where the case is filed. If neither of those counties has a participating county attorney, you can go to a third county. Remember, your driver’s license may be invalid for other reasons as well. You can identify reasons for your suspension at https://mymvd.iowadot.gov/Account/Login?ReturnUrl=%2FCompliance
Steps to take when making a payment plan:
- Get all your financial information together, like pay stubs, tax returns, and your bills, so you can prove what you can afford.
Figure out with what agency you need to make a payment plan.
- Tax debt: If you have tax debt, you will need to set up a payment plan through the Iowa Department of Revenue. You can call the Department of Revenue to set up the payment plan or visit their website to pay: www.PayDebt.Iowa.gov.
Court debt: If you owe court debt, who you set up a payment plan with will depend on the situation. It may be the judge, the clerk of court, the county attorney, the Department of Corrections, or the Department of Revenue. The rules about who collects these debts are complicated. If you owe court debt for more than one case, more than one of these agencies may be in charge of collecting the different debts.
- Department of Corrections: If you are on probation, the Department of Corrections will often set up a court debt payment plan as part of your probation.
- Clerk of Court: Court debt stays with the clerk of court for the first 30 days. You cannot get a payment plan with the clerk for a debt that is $300 or less. If you already have a payment plan with the clerk that you are current on, you may be able to add a new court debt of less than $300 to that plan.
- Department of Revenue: If you default on your court debt, it is first sent to the Department of Revenue. They may charge a collection fee. The Department of Revenue is under no limitations as to how low monthly payments may be, and there is no minimum total to qualify for a payment plan.
- County Attorney: In some (but not all) counties in Iowa, the county attorney may collect delinquent debt 90 days after imposition. Like the Department of Revenue, county attorneys under no limitations as to how low monthly payments may be, and there is no minimum total to qualify for a payment plan. Many county attorneys have developed their own programs which have different rules. You should contact the county attorney in the county where your debt is.
- Other debt: If you owe other debt, you should first contact the agency you owe. You will work out a payment plan either with them or with the Department of Revenue.
- Sometimes people have problems getting a payment plan that they can afford. They are told that a large down payment is required, or that the entire debt needs to be paid off within two years. Payment plans should be based on ability to pay. If you have problems securing an affordable payment plan, call Iowa Legal Aid or apply online anytime to find out if free legal help is available.
You May Be Able To Settle Your Court Debt
In 2010, the State of Iowa enacted a program to help individuals settle some court debt. Eligible people would settle the debt by paying the state 50% of what they owe. You may be eligible to do this if:
- You are under 200% of federal poverty guidelines;
- You are not in prison or jail;
- The court debt is more than four years old; and
- The court debt is not jail fees, restitution or civil penalties for certain motor vehicle offenses.
Please be advised that, while this program was established by law in 2010, the State has not yet developed forms for people to apply for it. If you think you may be eligible for this program, free legal help may be available, Call Iowa Legal Aid at 1-800-532-1275 or apply for legal help online anytime at iowalegalaid.org about possible assistance.
Some State Debt Is Dischargeable In Bankruptcy
Child support is not dischargeable in bankruptcy, nor are costs associated with criminal cases where the defendant is convicted or pleads guilty. Civil fines are also generally not dischargeable.
On the other hand, many other state debts are dischargeable in bankruptcy. This includes reimbursement for court appointed attorneys in juvenile and civil cases, as well as criminal cases where a defendant is acquitted or charges are dismissed, as well as other costs associated with those cases.
Helping low-income Iowans with income maintenance problems is a priority of Iowa Legal Aid. If your wages or a bank account are garnished by the state of Iowa, or you need help with a state debt collection problem, contact Iowa Legal Aid. You may be able to get free legal help. Call Iowa Legal Aid at 1-800-532-1275 or apply online anytime at iowalegalaid.org.
Last review 10/2/13