If Overpaid for Unemployment in New York, Can They Garnish My Wages?

Being unemployed is a stressful experience, though being eligible for unemployment compensation certainly does help the situation. If you collect unemployment in New York, ensure that you keep track of your payments and report any earning to the unemployment office when you certify for benefits. If you don't report all earnings, even freelance earnings, the New York Department of Labor may view this as fraud and will begin collection efforts. Not only your wages can be garnished.

Overpayments

Overpayment of unemployment benefits in New York is a huge problem. As of September of 2010, more than 80,000 people had been sent repeated notices regarding fraudulently collecting unemployment benefits to the tune of $140.7 million. Some of the debts have been owed for a decade and there is no statute of limitations. New York will aggressively pursue you if you owe them for unemployment overpayments because as of 2010, the NYS Unemployment Insurance Trust Fund has a deficit of $3.1 billion.

Willful or Non-Willful

Under New York law, if you are overpaid by unemployment, the overpaid amount is collected from your unemployment checks until it is paid off. If the New York Department of Labor determines that the overpayment was willful -- you knew you were being overpaid -- it can garnish 100 percent of your unemployment check. If the overpayment was unintentional, then the department only garnishes 50 percent of your unemployment wages. You are not assessed interest and late charges. You can appeal the ruling if it will cause you severe hardship such as loss of your dwelling or inability to purchase food.

Collection Techniques

New York State uses several different tactics to collect fraudulently obtained unemployment compensation. It uses "general collection techniques," according to a 2010 press release, including judgments filed by the Attorney General. In addition, it garnishes state tax refunds and you forfeit future unemployment benefits. You are given an opportunity to provide proof that you don't owe the debt, prior to the garnishment proceedings. Acceptable proofs include the debt was discharged in bankruptcy, it was already paid or the Social Security number is not yours so you are not the debtor.

Federal Offset

In 2008, Congress passed legislation directing the Treasury Department to assist the Department of Labor with collecting fraudulently obtained unemployment benefits. Labor notifies the Treasury Department's Financial Management System (FMS) of unemployment debts owed to the states, and FMS garnishes your federal tax refunds for payment. New York began participating in the program in September of 2010, but could only collect in cases of fraud. The debtor also had to reside in New York. Since then, Congress passed the Claims Resolution Act of 2010, which allows New York to collect unemployment debt from your federal tax refund, without the restriction that the debt was the result of fraud, and regardless of which state you live in.