Tax Refund Offsets Pay Unpaid Debts - 2017

IRS Tax Tip 2017-33, March 21, 2017

The Treasury Offset Program will use all or part of a federal tax refund to settle certain unpaid federal or state debts.

Here are five facts about the Treasury Offset program:

  1. Bureau of the Fiscal Service. The Department of Treasury’s Bureau of the Fiscal Service issues IRS tax refunds and Congress authorizes BFS to operate the Treasury Offset Program.
     
  2. Offsets to Pay Certain Debts. The BFS may use part or all of a tax refund to pay certain other debts such as:
    • Federal tax debts.
    • Federal agency debts like a delinquent student loan.
    • State income tax obligations.
    • Past-due child and spousal support.
    • Certain unemployment compensation debts owed to a state.
       
  3. Notify by Mail. The BFS will mail a notice to a person if it offsets any part of their refund to pay a debt. The notice will list the original refund and the offset amount. It will also include the agency that received the offset payment. It will also give the agency’s contact information.
     
  4. How to Dispute Offset. Taxpayers who wish to dispute an offset payment should contact the agency receiving the offset payment. Contact the IRS ONLY if the refund offset pays a federal tax debt. The IRS does not have access to information regarding a state or other federal agency debt offset.
     
  5. Injured Spouse Allocation. People who file a joint return may be entitled to part or the entire offset. This rule applies if the spouse is solely responsible for the debt. Taxpayers should use Form 8379, Injured Spouse Allocation, to get part of a tax refund. An injured spouse can use the Interactive Tax Assistant tool Can I or My Spouse Claim Part of a Refund Being Applied toward a Debt Owed by the Other Spouse? This tool helps a taxpayer decide if they should file a claim for part of a refund jointly applied toward a spouse's past due debt for which they aren't responsible.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Learn more about how to verify your identity and electronically sign your tax return at Validating Your Electronically Filed Tax Return.

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