Unpaid Debt Can Affect Your Refund

If you owe a debt that’s past-due, it can reduce your federal tax refund. The Treasury Department’s Offset Program can use all or part of your refund to pay outstanding federal or state debt.

Here are ten facts to know about these tax refund offsets:

  1. The Bureau of Fiscal Service (BFS) runs the Treasury Offset Program.
  2. Debts such as past due child support, student loan, state income tax or unemployment compensation may reduce your refund.
  3. BFS may use part or all of your tax refund to pay the debt.
  4. You’ll receive a notice if BFS offsets your refund to pay your debt.
  5. The notice will list the original refund and offset amounts.
  6. The notice will also include the agency that received the offset payment and their contact information.
  7. If you believe you do not owe the debt or if you want to dispute it, contact the agency that received the offset.
  8. You should not contact the IRS or BFS to dispute the offset as these agencies will not reply to your protests.
  9. If you filed a joint tax return, you may be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund, file Form 8379, Injured Spouse Allocation.
  10. The IRS provides more information on this program at the following link:  Tax Topic 203Refund Offsets.

DISCLAIMER: This information is extracted with permission from IRS regulations and publications.   We are not responsible for the application of this general information to the specific circumstances of a reader unless we have been engaged as the reader’s tax return preparer or consultant.



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