New Report Examines the Harms of Seizing Tax Refunds to Collect Criminal Justice Debt  

January 30, 2025 — Press Release

To Protect Children’s Financial Security and Aid Reentry, Governments Should Prevent Seizure of Earned Income Tax Credits and Child Tax Credits

BOSTON – Federal and state governments use a wide array of methods to collect the billions of dollars owed as the result of criminal fines, fees, costs, surcharges, interest, and restitution. A new report looks at one little-known method of collecting that outstanding criminal justice debt: seizing income tax refunds. 

Seizing the Safety Net: Collecting Criminal Justice Debt with Tax Refund Offsets highlights data about this collection practice and the financial harms that can result for both justice-involved individuals and their children when essential government benefit payments such as the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) are seized as part of that tax refund. The CTC and EITC are two of the largest anti-poverty tax programs in the United States, lifting millions of children out of poverty each year, and are linked to improved child health, success in school, and future earnings.

The report also identifies how seizure of the EITC–a tax credit designed to reward work–may discourage justice-involved individuals from working in the formal labor market, jeopardizing successful reentry.

“Federal and state EITC and CTC are critical social safety net programs that lift families and children out of poverty,” said April Kuehnhoff, senior attorney at the National Consumer Law Center and co-author of the report. “Offsetting tax refunds to collect criminal justice debt can result in seizure of essential anti-poverty benefits and have devastating effects on justice-involved individuals and their children, potentially hindering reentry.”

“The lack of comprehensive data on court debt collection practices like seizure of income tax refunds makes it challenging to assess their full impact on families,” said Marina Levy, an analytics consultant and co-author of the report, “Federal and state governments need to require robust, transparent record-keeping and make this data publicly accessible to better understand and reform these practices.” 

The report recommends that federal and state governments:

• Amend their laws to prevent offset of the EITC and CTC.
  • Until such a change is made, they should provide detailed annual reporting about the amounts offset generally and from households that received the EITC and/or CTC specifically. 
• Improve reporting about the amount of criminal justice debt outstanding and the methods of collection that they use.

Related Resources

• Letter to Treasury Regarding Tax Offset of EITC and CTC Benefits and Implications for Justice-Involved Individuals, Feb. 7, 2023
• Joint Memo: Recommendation to Amend IRC § 6402 to Prohibit Offset of Refundable Tax Credits that Support Low-Income Workers and Families, Feb. 10, 2022
• Delivering on the Child Tax Credit: Protect Payments from Government Offset, September 2021
• Voices of Despair: How Seizing the EITC is Leaving Student Loan Borrowers Homeless and Hopeless During a Pandemic, Nov. 10, 2020
• Stop Taking the Earned Income Tax Credit from Struggling Student Loan Borrowers, Oct. 2016