Your Tax Refund and Offsets to Pay Your Unpaid Debts

SOURCE: IRS Tax Tip 2015-49

If you can’t pay your taxes in full, the IRS will work with you. But you should know that back taxes or certain past due debts can reduce your federal tax refund. The Treasury Offset Program can use all or part of your federal refund to settle certain unpaid federal or state debts. Here are five facts to know about tax refund offsets.

 1. Bureau of the Fiscal Service.  The Department of Treasury’s Bureau of the Fiscal Service, or BFS, runs the Treasury Offset Program.

 

2. Offsets to Pay Certain Debts.  Past due federal tax debt may reduce your tax refund. The BFS may also use part or all of your tax refund to pay certain other debts such as:

  • Past-due child and parent support.
  • Federal agency non-tax debts, such as a delinquent student loan.
  • State income tax obligations.
  • Certain unemployment compensation debts owed to a state.

 

3. Notified by Mail.  The BFS will mail you a notice if it offsets any part of your refund to pay your debt. The notice will list the original refund and offset amount. It will also include the agency that received the offset payment. It will also give their contact information.

 

4. How to Dispute Offset.  If you wish to dispute the offset, you should contact the agency that received the offset payment. Do not contact the IRS.

5. Injured Spouse Allocation.  You may be entitled to part or all of the offset if you filed a joint tax return with your spouse. This rule applies if your spouse is solely responsible for the debt. To get your part of the refund, file Form 8379, Injured Spouse Allocation. You can view, download or print tax forms on IRS.gov/forms at any time.

Health Care Law: Refund Offsets and the Individual Shared Responsibility Payment
The law prohibits the IRS from using liens or levies to collect any individual shared responsibility payment. However, if you owe a shared responsibility payment, the IRS may offset that liability against any tax refund that may be due to you.

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