Can You Prepay Taxes To Protect Money From Judgment Creditors?

The answer is yes. When you prepay taxes to the IRS or make an excessive tax payment, a judgment creditor has no method to get the money back.

A judgment creditor cannot garnish the IRS to collect a civil judgment in the absence of specific statutory authority. Such authority exists, for example, for the collection of state child support awards.

In addition, a state court judge cannot enforce an order against the IRS for the turnover of taxpayer money to collect a civil judgment because the state court judge lacks federal jurisdiction. There are no federal statutes giving such power to state courts to collect general civil judgments.

In other words, if you prepay taxes to the IRS or make an excessive payment, the Florida judgment creditor will have no remedy to get money the debtor transfers to the IRS to avoid his creditors.

Excessive payments to the IRS to avoid paying judgment creditors are clearly fraudulent transfers or fraudulent conversions. A creditor’s lawsuit to recover a fraudulent transfer would name the debtor and the IRS as defendants. The judgment creditor would have to sue the IRS (probably in federal court), and even if he could prove the debtor’s intent to evade collection, the civil judgment creditor may be without a remedy to get the money.

Sometimes, simple asset protection plans that do not work legally are very effective practically.

Jon Alper

About the Author

I’m a nationally recognized attorney specializing in asset protection planning. I graduated with honors from the University of Florida Law School and have practiced law for almost 50 years.

I have been recognized as a legal expert by media outlets such as the New York Times and the Wall Street Journal. I have helped thousands of clients protect their assets from creditors.