Where’s my refund?
Can the IRS take my tax refund?
I thought I paid that?
Every tax season, without fail, a client will come to me in a panic because instead of receiving that much anticipated refund, they have just received a letter notifying them that their refund has been reduced or taken all together. It’s called an offset. Let’s take a look at how offsets can happen and what we can do to avoid them in the future.
The Treasury Department issues refunds through its Bureau of Fiscal Services (BFS). The BFS also has the authority to offset (reduce or seize) refunds through what’s called the Treasury Offset Program also referred to as TOP. Essentially TOP maintains a database of payments we make and debts we owe to certain government agencies. Those agencies include but are not limited to state child support agencies, the US Department of Education, State unemployment and revenue agencies. These agencies are clients of TOP and TOP acts as a collection agency for them. These agencies report our payments and outstanding debts to TOP and TOP maintains this information on their behalf.
There are four primary debt obligations that can cause your refund to be offset.
- Delinquent child or parent support payments.
- Federal agency debts (i.e. Federal Student Loans)
- Delinquent state income tax obligations
- Fraudulent Unemployment Compensation (benefits received thru fraud or contributions owed and not paid due to fraud)
When a taxpayer files a tax return, during that time between filing and receiving (or not receiving) your refund the Bureau of Fiscal Services (BFS) is running your Tax ID Number through the TOP’s database. If there is a match instead of receiving your refund you will receive a notice of offset. The notice will list your original refund amount, how much is being offset, what agency the offset is being credited to and the agency’s contact information. If you feel that you do not owe the debt then you should call the agency listed on the offset notice first. If you contact the IRS first they will simply refer you to the agency listed on the offset notice.
So how can we avoid having tax refund offsets? Well there are several things we can do, most importantly staying on top of our financial obligations. To help us accomplish this task we must be disciplined. Instead of allowing the government to keep and hold so much of our money during the year, reduce your withholdings so that you receive more of your hard earned money throughout the year. That way you can use these additional funds to stay on top of obligations such as child support, student loans and state taxes.
The Federal Student Loan program offers several options for deferring payments including hardship deferments. Visit the following link for more information. https://studentaid.ed.gov/repay-loans/deferment-forbearance
When it comes to Unemployment Compensation all I can say is don’t be foolish. If you are receiving benefits you are required to report when you become employed. While your employer does have certain new hire reporting requirements it is your responsibility to report when you start working. It takes time for the new hire reports to reach the various government agencies and in the meantime you may have received several weeks of benefits that you are no longer entitled to. This constitutes fraud. The Treasury Department will find out, Unemployment will find out and report the debt to TOP and you will be required to pay those benefits back. Hopefully that’s all you’ll be required to do and not face prosecution.
I hope you found this information helpful. If you have specific questions you can always reach me at 866-529-6931 or at felicia.cook@onebox.com.
Have a Blessed Day Everyone!
Sources:
www.irs.gov/taxtopics/tc203.html
http://fiscal.treasury.gov/fsservices/gov/debtColl/dms/top/debt_top.htm
www.natp (Members Only Section)
feliciacook 