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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4674
Experience:  35 years tax experience, including four years at a Big 4 firm.
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All of my and my husband's income are from the VA Retirement

Customer Question

All of my and my husband's income are from the VA Retirement System and social security. The Code of VA 51,1-124.4 clearly exempts retirement checks and social security checks from attachment. So how is that the City of Danville, was able to have the VA Dept of Taxation to withhold over 50% of va state tax refund? I previously had a company hire an attorney and took me to court to attach my bank account. Fortunately, I had carried the above referenced code number with me to the hearing and the judge had a clerk bring him the code after which he told them they could not touch my retirement. So how is the city of Danville was to do this?
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.
Hi from just answer. I'mCustomer There is an issue of debt collection that I think applies in your case.
Expert:  PDtax replied 1 year ago.
While the incomes you mention are limited in creditor pursuit or collection, other sources of cash are not. Tax refunds are not exempt, for example.Also an issue is a change in character once payments are fungible, or turned into cash. They once were considered to change character. That applies to exempt payments that are deposited in a bank account.Previously, funds deposited list their protected character and were just considered cash, which creditors could pursue. Later, people defended their rights by litigating creditor pursuit of bank accounts, and the courts, IRS and others agreed that exempt property does not lose its exemption just because it was deposited in a bank.I suspect that is why you won when you went to court. The judge saw your proof of where the funds came from.A tax refund does not qualify for that kind of exemption. That is likely why the funds were targeted. A city can easily file a warrant or lien that would attach to payments due to you. It's whether they are entitled to keep the money that's the issue.I hope that shed some light on your question. If so, please rate my assistance with the following rating scale. Positive feedback is appreciated. I'mCustomer