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When the IRS Takes Your Refund

February 19, 2015

If you were expecting to get your tax refund and you did not receive it, you may owe back taxes. However, there are various reasons you may not receive your refund. First, your identity could have been stolen and your refund money directed to another address. Or, your tax return was wrong and after correction, your refund was applied to satisfy the new balance. Third, you owe back debt to a federal or state government agency, and your refund was taken to resolve the debt.

When you owe back taxes to the IRS, any refunds you would be due are applied to the balance until it is paid in full. This is called refund offset. Depending upon the tax debt amount, the entire refund may be taken.

Some important facts to know about refund offsets that are:

  • When the Treasury Department reduces your tax refund, it usually means that you have unpaid debts.
  • The Treasury Department’s Financial Management Service (FMS) issues tax refunds and controls the Treasury Offset Program.
  • Unpaid debts can be in the form of overdue child support, state income tax, student loans, etc.
  • When your refund is used by the FMS to pay unpaid debts, you are sent a notice regarding the offset. This notice includes the original tax refund, the offset payment amount, and the agency’s contact information.
  • If you believe that your refund was erroneously offset, you should contact the agency that received your refund-offset amount, not the IRS or the FMS.

If you filed jointly with your spouse and your refund was offset, you may be able to get back a partial or full amount of your refund under Innocent Spouse Relief. You can only get relief if your spouse was solely responsible for the debt, and you had no knowledge or no reason to know of the inaccurate return information.


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