If you owe taxes or some other type of debt and you happen to be due a tax refund, then you will discover that the government has withdrawn some or all of your tax refund.
Under the Treasury Offset Program, the Treasury Department is authorized to offset money from tax refunds and Social Security benefits to pay off the debt. This is sometimes called “administrative offset” or simply “offset.” This occurs when you don’t pay a government agency on time and you owe money.
How does the Tax Refund Offset Program work?
If you’re not paying money to a state or federal government agency, it sends your information to the Treasury Offset Program (TOP). Then the Bureau of the Fiscal Service (BFS), which is responsible for issuing tax refunds from the IRS, may reduce the refund sent to you to pay off the debt.
What if your refund is offset?
When you file your tax return, BFS checks your taxpayer ID information in the TOP database to see if you owe any money. If there is no match, you will get your full refund. But if the database finds that you owe money, some or all of your refund will be withheld. Next, you will get a letter from BFS with:
- The original refund amount
- The amount that was deducted
- The agency to which the payment will be sent
- The contact details of that agency
What is the difference between offset, garnishment and seizure?
Refund offset is one method the government uses to collect what you owe, but there are other methods:
- Offset of refund: When you file your tax return with the IRS, the Treasury Department’s Bureau of the Fiscal Service can apply the amount of your tax refund to pay off what you owe.
- Garnishment: The IRS can garnish your wages to pay off your tax debt.
- Seizure: The IRS can apply money from your bank account or seize your assets, such as property and vehicles.
Why would the IRS take your refund?
Here are some common reasons the IRS might seize your tax refund:
- You owe taxes: If you owe state or federal taxes, the IRS can deduct your refund.
- You have student loans: If you have outstanding student loans, your refund can still be deducted, but you may get a reprieve this time.
- You have not paid child support. You owe over $150, so your refund may be seized.
- Your spouse has debt. When filing jointly, any debt incurred by your spouse will be applied to your return before you see any refund.
Can I get my refund if I am in default on my student loans?
If you are currently behind on your student loans, you can collect your 2023 tax refund. The Department of Education provides temporary relief as a result of COVID-19. However, if you’re in default, you’ll be required to sign up for the Fresh Start Program to ensure that no future refunds are taken.
Can anyone else take my refund?
Only the federal government will deduct from tax refunds and only if you owe a government agency. The private lenders can not include that your refund would be deducted: Credit card company, Bank.
FAQs
Q.Will I be notified before my debt is submitted to the Treasury Offset Program?
A.You are being sent at least 60 days advance notice and details on the debt.
Q.How do I dispute the offset?
A.Contact the agency listed on the offset notice. If the amount on your refund and the amount shown on the notice are different, contact the IRS.
Q.Can the IRS seize my refund if my spouse owes taxes?
A.If you file jointly, and your spouse owes money to the IRS, they can even take your refund. But if you did not owe that debt, you might be able to get your portion back by filing Form 8379.
