Is your tax check going to a past due debt?
The possibility of a tax refund being diverted away before it even lands in a taxpayer’s bank or loan account is well known among tax preparation services and financial institutions.
If you look up the fine print on some refund anticipation check or debit card services, you’ll notice that there is an explanation that the refund can be less than expected if the IRS invokes an offset.
What is an offset?
Here’s the explanation from IRS. gov
The Department of Treasury’s Financial Management Service (FMS), which issues IRS tax refunds, has been authorized by Congress to conduct the Treasury Offset Program. Through this program, your refund or overpayment may be reduced by FMS and offset to pay:
- Past-due child support;
- Federal agency non-tax debts;
- State income tax obligations; or
- Certain unemployment compensation debts owed to a state. (Generally these are debts for compensation that was paid due to fraud or for contributions due to a state fund that were not paid due to fraud).
You can contact the agency with which you have a debt, to determine if your debt was submitted for a tax refund offset. You may call FMS at the number below for an agency address and phone number. If your debt was submitted for offset, FMS will take as much of your refund as is needed to pay off the debt and send it to the agency you owe. Any portion of your refund remaining after offset will be issued in a check to you or direct deposited for you.
Does this really happen?
Oh, yes. I’ve heard of such situations word of mouth in previous years, and have already heard such a story involving this year’s tax season.
This post has one comment
February 21st, 2013
There are some major issues that need to be addressed about tax refund Offsets. Here is a little more about non tax offsets. Once a person is certified for offset, “ANY” tax refund due will be offset. I just learned this the hard way. I been waiting for a refund, from a 1040X (Amended tax return) that I submitted and received by the IRS in early November 2012. I called in early February 2013 to check the status and found out that I am certified for offset. In researching options I may have, I came across a letter, Debt Statement, the Dept. of Ed. sends out notifying borrowers of possible offset. It states, “income tax refund to which you may be entitled during the next filing season”. I thought my tax refund would be safe since the offset was submitted in December 2012 and the next filing season would be for the 2013. WRONG!!!! Even though I submitted a claim for refund before being certified for offset, my Amended tax refund will be offset, according to FMS. How can this be legal? I don’t know… I am still researching the issue. I am no lawyer, but it seems there would be some legal issues here. If that was not enough, there is even a bigger problem non tax offsets, COLLECTION AGENCIES. When I received the notice about the possible offset of my tax return, I followed the instruction on that notice and called the number listed on the letter. After inputting my personal info, the message said my debt is with a collection agency and to contact them to set up a repayment program. I did. But because was unemployed and had minimal income, the C.A. told me that since I was not able to make satisfactory payments, they could not set me up on any type of repayment plan. I was advised to call back when I could afford a larger payment. Because I called, as directed, and tried to set up a repayment plan, I believed I was clear and free of being certified for a tax refund offset. WRONG!!!!!! I only recently learned that by law, they have to allow me into a repayment program that fits my financial budget. Whether it be $5 or $1500. Its no secret that C.A.’s are paid by how much they receive. The more they collect the more they make. This is plain and simply, WRONG, not to mention illegal. Sure, I can file a complaint against them, but at the end of the day, it’s my word against there’s.