Focusing on Kansas as a case study, this report examines how federal and state governments seize income tax refunds to collect and pay off (“offset”) criminal justice debt. These tax refunds usually include Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) benefits, which are critical social safety net programs designed to help working families and reduce child poverty. The practice of offsetting prevents benefits from reaching families in need and can have devastating financial consequences, particularly for families of justice-involved individuals who already face significant barriers to employment and economic stability.
Despite the majority of criminal justice debt being considered uncollectible (less than 20 percent is deemed collectible), governments continue aggressive collection practices that disproportionately harm vulnerable populations. In fiscal year 2022, the Treasury Offset Program (TOP) seized nearly $54 million in tax refunds to collect accounts for the Department of Justice (DOJ), representing only about 3 percent of all payments received on federal criminal justice debt that year. Though tax refund seizure is a relatively small part of overall criminal justice debt collection, it has outsized negative impacts and ripple effects on justice-involved individuals’ families and children.
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Key Findings:
- 62.1 percent of funds recovered by TOP for DOJ debts came from tax refund offsets.
- In Kansas, nearly 83 percent of the $4 million collected for court debts in 2023 came from tax refunds, and the highest number of payments were collected in March and April (29% combined) when many people receive tax refunds.
- In Kansas, the debt collector’s method of calculating fees increased the total amount justice-involved individuals must pay. By including their fee in addition to the court fee, the private debt collector raised fees by 50 percent.
Recommendations:
The federal government should:
- Amend the Debt Collection Improvement Act (DCIA) and Internal Revenue Code to exempt EITC and CTC from offset for non-tax debt collection.
- Encourage the Internal Revenue Service (IRS) to use its discretionary power to refund money to taxpayers who qualify for EITC and CTC that was seized through tax refund offsets.