How to Find Out If Your Federal Tax Refund Will Be Offset
When tax season rolls around, many taxpayers are surprised to find out that they will not receive the refund that they have coming to them. If you owe money on a student loan, for child support, or for past state or federal taxes, your refund may be "offset," or withheld by the IRS. The entire refund or just part of it may be held.
Here's how to find out whether this may happen to you, plus more information about when a refund can be offset.
How Can You Find Out if Your Refund Will Be Offset?
The federal Bureau of the Fiscal Service (BFS), part of the Department of the Treasury, issues refunds and tracks offsets. Call the Bureau of the Fiscal Service directly at this toll-free number: (800) 304-3107.
- Listen to the prerecorded message and do as instructed.
- Do not call on someone else's behalf, as this is a violation of federal law. The call center records callers' phone numbers.
- Enter your social security number when prompted. The BFS will search its database to see if there is an offset against your debt. Write down any information provided, including the creditor agency that created the offset, so that you can call with any additional questions.
- New debts are added to the database daily, so if the recording says no offsets were found, you may want to check again in a few days.
When Can a Tax Refund Be Withheld?
Your IRS tax refunds can be withheld in order to pay:
▪ Back federal taxes
▪ Past-due child and parental support
▪ Federal agency debts other than taxes, like student loans
▪ State income tax that you owe
▪ Other debts owed to a state, including overpaid unemployment compensation
You will receive a notice to let you know that your refund will be offset. The notice may arrive a couple weeks after the offset is put into the database. The notice will show your original refund amount, your offset amount, the agency that the offset was paid to, and its address and telephone number.
If you receive this notice and have questions, contact the agency directly that received the offset.
Will the IRS Itself Withhold Your Refund?
If you owe money to the IRS, they will take it out of your refund, even if you are already making payments under an installment agreement. And they will take it before any other agency can make an offset.
If you think the IRS itself may withhold your refund, or if the offset notice has a different figure for your refund than the one you calculated in your return, call the IRS directly at 1(800) 829-1040.
If you owe money to a federal government agency other than the IRS, you can call that agency directly to find out if your refund will be used to pay your debt.
Can You Prevent Your Tax Refund From Being Taken to Pay Student Loans?
If your student loan is already "in default" (270 days or more late), the IRS will hold up your refund and apply it to your student loan, and there is no easy way to ever get this money back. You can find out if your own federal student loans are in default by looking them up on the National Student Loan Data System, a government database.
"If your loans are in default, you might lose your tax refund. You can avoid this by not filing, and getting your loans out of default," says Joshua Cohen, a Vermont attorney who represents former students in disputes about their loans. Since you can wait up to three years to file for a given year's refund, you want to remove the default first, by setting up a payment schedule with the lender. "After fixing your loan status, wait 60 days, then file for your refund. That is the only safe way to keep your refund." See Cohen's video below.
If you are falling behind on your student loan payments, US News and World Report says the lender should mail you a notice before setting up an offset. These notices typically go out at the end of the summer. To try to prevent the offset, contact the loan holder who mailed out the notice and work with them to set up a payment schedule.
What if the Offset Is Your Spouse’s Fault and Not Yours?
If you are married and file jointly, and your spouse's refund will be offset, you may be entitled to your part of the refund. To find out, file an Injured Spouse Allocation form, or form 8379. For more information about this process, call the Bureau of the Fiscal Service at the number above, (800) 304-3107. The IRS website has detailed advice about form 8379. You can file the form with your tax return or file it separately after you receive notice of an offset.
Will a State Offset Your State Tax Refund?
A state can take your state tax refund to pay the IRS or other government agencies, and if your student loan is with a state guaranty agency, a state can take your state refund to pay student loan debt.
Delay for Refunds Involving Earned Income Credit, Additional Child Tax Credit
In 2018, as in 2017, the IRS will delay processing tax refunds for those claiming the earned income credit (EIC) or the additional child tax credit (ACTC). The IRS does not expect to issue any refunds for these filers until February 27 at the earliest, and even then only for those who asked for direct deposit and had no issues with their return. Starting then, you can check the timing of your return online daily at Where's My Refund. You will need your social security number and the exact amount of your refund.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
Questions & Answers
When do you receive a notice of a Federal Tax Refund by mail?
You may not receive a notice.