DWD Will Collect Unemployment Overpayments From Tax Refunds

Some Hoosiers are finding out money from their income tax refunds are being taken by the Department of Workforce Development to pay off unemployment benefits they received by mistake. However, the department has suspended other types of collections during the public health emergency declared by the governor.

An overpayment happens when the state pays someone unemployment benefits and later determines they’re ineligible for those benefits. Indiana law allows DWD to collect that money back in a variety of ways, including intercepting state and federal tax refunds or lottery winnings. However that can be prevented if someone has appealed the overpayment or applied for it to be waived.

During the pandemic, DWD has suspended wage garnishment and reduced the amount it collects from future unemployment benefits to a maximum of $10 each week.

Courtney McDonald says she was surprised when about $150 of her tax refund was taken to settle the overpayment she was already making payments on.

“I’m glad they did take it, that way I can go ahead and get the bill over with,” she said. “But I would have liked to have known they were going to take it. I don’t feel like their communication is very good.” 

At the end of 2020, the state reported about $35 million in outstanding non-fraudulent overpayments, levels not seen since the result of an unemployment surge during the Great Recession.

Contact reporter Justin at jhicks@wvpe.org or follow him on Twitter at @Hicks_JustinM.