Recovery Rebate Can Be Reduced
If You Owe Back Taxes,
Child Support

Kiplinger tax editors responded to the following question from a reader of Personal Finance:

Question: Can my government stimulus payments be reduced if I owe child support or back taxes?

Answer: Possibly. Your first- or second-round stimulus check can’t be taken away to pay back taxes or other government debts you owe. Second-round stimulus checks can’t be garnished to pay child support arrears or money owed to private creditors or debt collectors, either. But what if you didn’t receive a stimulus check – or didn’t receive the full amount – and you’re expecting to get the stimulus money your entitled to by claiming the "recovery rebate" credit on your 2020 tax return?

Because of a little-known provision in the COVID-relief law passed in December, those protections don’t apply to recovery rebate credits. So, if you get a refund on your 2020 tax return because of the credit, the IRS can take it away to pay any child support, taxes or other government debts you owe. Banks and other creditors and debt collectors may be able to snatch your refund, too.

The IRS is aware of this situation and could provide some relief. Congress could step in and change the law too. But for now, garnishment of any tax refund you get this year is possible – even if the refund is entirely based on the recovery rebate credit.