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 private collection agency or 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. By law, garnishment notices in Iowa say that there are no exemptions for collection of state fines. However, this directly conflicts with a U.S. Supreme Court decision, Bennett v. Arkansas. So, you can still challenge the garnishment of federal benefits even though the notice says that you cannot.
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 or a private debt collector (see below). It depends on who collects for the 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
BE CAREFUL! You only get one chance to make a driver's license reinstatement plan work. If you fail, you have to pay off your entire debt before you can get your license back. It is very important not to agree to something you can't maintain. If your situation changes after you start a plan, you can apply to the county attorney or debt collector within 15 days after your payment was due to modify your payment amount.
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.
- Private Collection Agency: Some counties use a private collection agency to collect court debt. Currently, this is the Linebarger, Goggan, Blair and Sampson in Texas. This law firm can garnish wages and bank accounts, but must follow the law generally applicable to other kinds of creditors. You have the right to claim certain money to be "exempt," as mentioned above. The counties currently using this collection firm in 2017 are: Adair, Appanoose, Cedar, Chickasaw, Clarke, Crawford, Davis, Decatur, Delaware, Dubuque, Floyd, Franklin, Grundy, Guthrie, Hamilton, Hancock, Henry, Howard, Humboldt, Keokuk, Lucas, Mahaska, Mitchell, Monroe, Montgomery, Page, Shelby, Union, Van Buren, Wapello, Wayne, Winnebago, Worth, Wright.
- County Attorney: In those counties in Iowa not listed above, the county attorney is also the debt collector. The county attorney may collect delinquent debt 30 days after it becomes delinquent. Like the private collection agencies, 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 may be able to work out a payment plan with them. Their contact information should be on the initial notice that you receive.
- 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.
Some State Debt Is Dischargeable In Bankruptcy
Child support is not dischargeable in bankruptcy. Criminal fines are not dischargeable, nor is victim restitution. Some costs associated with criminal cases where the defendant is convicted or pleads guilty, but some are not. 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. Attorney fees and jail fees in criminal cases after conviction or a plea might be dischargeable.
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.
- Iowa Legal Aid provides help to low-income Iowans.
- To apply for help from Iowa Legal Aid:call 800-532-1275.
- Iowans age 60 and over, call 800-992-8161 or
- apply online at iowalegalaid.org
If Iowa Legal Aid cannot help, look for an attorney on “Find A Lawyer” on the Iowa State Bar Association website iowabar.org. A private attorney there can talk with you for a fee of $25 for 30 minutes of legal advice.
*As you read this information, remember this article is not a substitute for legal advice.