Your tax refund can be offset and applied towards federal tax debt or many other types of debt. You’ll need to figure out which agency is receiving your refund money by looking at your offset notice.
Tax refunds can be offset to pay the following debts:
- Federal tax debt
- State tax debt
- Federal non-tax debt, such as student loans
- Past-due child support
- Certain unemployment compensation debts
You have to contact the agency that’s taking your money through the Treasury Offset Program (TOP). The IRS won’t be able to help you resolve other types of debt because they aren’t the ones administering the TOP.
Resolve Your Debt
You may be able to avoid the offset by negotiating a debt resolution with the appropriate agency. However, this doesn’t guarantee that you’ll start getting tax refund checks, at least not right away. The only way to do that is generally to pay off your full balance.
For example, the IRS can continue to offset your refund while you’re making payments in an installment agreement. They can also take your refund during the calendar year your Offer in Compromise is accepted.
In these cases, it might take a while before your refund are no longer offset, but you’ll be working towards getting rid of your tax debt for good.
If you can’t avoid the refund offset, you can try to limit the amount that gets seized. Reducing your withholdings or estimated tax payments can put more money in your pocket and make your refund smaller.
The tricky part is that you don’t want to reduce your withholdings too much. If you do, you’ll owe taxes when you file your return and may face underpayment penalties.
One situation where you can avoid a portion of the refund offset without paying off your full balance is when you are an injured spouse. Taxpayers that meet the following conditions may be injured spouses:
- Your spouse has debts that he or she incurred before you were married.
- Your joint refund was offset and applied towards his or her debt.
- A portion of the refund is attributable to your tax items (your income, etc.)
You can get the portion of the refund attributable to your items by filing an injured spouse claim with your return or after you receive the notice of offset.
Get help with IRS tax debt by calling The Gartzman Law Firm at (770) 939-7710. We can help you avoid IRS collections and resolve your tax problems.