Is Your Refund At Risk Due to a Tax Offset?

If you have an outstanding debt with the IRS, another federal agency, or other creditors, your tax refund could be at risk. That’s because the U.S. Department of Treasury has the legal authority to issue a tax offset to pay your debt. It can take some or all of your refund, depending on what you owe. And here’s the scary part, they can do it year after year until your debt is paid in full.

What Debts Can Trigger a Tax Offset?

The federal Treasury Offset Program (TOP) may authorize the government to intercept your tax refund to pay off certain debts. Thankfully, this does not include credit cards, auto loans, or mortgages. It does, however, include the following:

• Unpaid federal taxes
• Past-due state income taxes
• Student loan debt
• State unemployment compensation debt
• Overdue spousal or child support payments

For past-due federal tax debt, you should receive a “Notice of Intent to Offset” from the IRS alerting you that they plan to take some or all of your tax refund to satisfy your back taxes. All other tax refund offsets are handled through the Bureau of Fiscal Service (BFS). The notices will be sent to your last known address. If you’ve moved recently, you may not get the notice. Unfortunately, that won’t prevent the tax offset from happening.

How to Handle a Tax Refund Offset

Once you receive notice that your tax refund is being offset, you’ll have very little time to stop it from happening. If you disagree with the debt amount, you’ll need to contact the creditor who requested the offset and work out a resolution with them. Their information will be listed on the notice. Do not contact the IRS or TOP directly. They cannot stop the offset.

In most cases, the only way to stop a tax offset is to pay the debt in full. For student loans, you may be able to prevent the offset if you’ve recently entered into student loan rehabilitation or loan consolidation. Those who have filed for bankruptcy may also be protected.

For unpaid federal tax debt, contact Tax Assistance Group ASAP. We can help you get back into good standing with the IRS and help you avoid future tax refund offsets.