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Everything You Need to Know about Refund Offsets

March 13, 2015  |   Tax Advice,Tax Tips   |   Tags: , ,  

If you have certain unpaid debts, your tax refund can be taken to pay them. Depending upon how much you owe to the federal and/or state government, a portion or all of your refund can be used to satisfy the debt. This is called a refund offset. In the event that your tax refund is offset, you will be informed about it in advance.

federal tax refund

Typically, in cases of tax debt, taxpayers’ refunds are applied to the liability until it is satisfied in full. Failure to file a tax return is a common cause of tax debt. As long as a tax debt case remains unresolved, any refunds will be offset to satisfy the debt.



Some important factors to consider about tax refund offsets are:

  1. 1. The notice you receive will include your original tax refund amount and the amount offset by the FMS.
  2. 2. Your notice will have the name and contact information of the agency receiving the offset payment.
  3. 3. If you do not owe the debt (especially in the case of married filing jointly) and you want to claim your refund, you should contact the agency that received the offset amount, not the IRS or FMS.
  4. 4. If you filed jointly, your spouse was solely responsible for the debt and your refund was offset, then you can submit a request to retrieve a portion of your refund by filing Form 8379, Injured Spouse Allocation. You can call the IRS at 1-800-829-3676 to get information on this form.

Along with income tax debt, other debts such as child support or student loans are also satisfied using refund offsets. If your debt amount is less than your refund amount, the FMS will take from your refund as much as is needed to pay off the debt and send you the difference. On the other hand, if your debt is more than your refund, the FMS will use your entire check along with any future refunds.