A refund offset is when the government keeps part or all of your tax refund in order to cover certain kinds of government debt. If this happens, your refund will be reduced by the amount of the debt or part of it. This can result in not getting a refund when you were expecting one.
Refund offsets are determined by the same part of the U.S. Treasury that issues refunds. There are several kinds of debt that might trigger an offset:
1. Past due federal tax: That is, if you owed last year and did not pay all of it, they may take it out of the refund.
2. State income tax: This is the same scenario on the state level.
3. Unemployment compensation debts: This occurs when you are caught involved in fraud or if you owed contributions to a state fund (as an employer) and did not pay them. This is relatively rare.
4. Unpaid child or spousal support.
5. Federal debt including student loans.
You will be notified if your refund has been offset. If it was for federal tax, the notification will come from the IRS. For anything else it will come from the Bureau of the Fiscal Service. You always have the right to challenge a refund offset. You have the right not to pay more tax than you owe. If you have a refund offset, you should contact the appropriate bureau. Also, if your spouse owes a debt and you do not, you can make an injured spouse claim to request your portion of the refund.
The best way to avoid an offset is to try and keep up payments on your various debts. But if an offset occurs, then you do have the right to make your case. Regardless of which bureau is involved, Civic Tax Relief can help. Our experts are the go-to folks to resolve your tax refund offset issues and help you move forward.