Millions of Americans look forward to receiving their tax refunds each year, but for some, that money may never reach their bank accounts.
The IRS has the authority to seize tax refunds to cover certain outstanding debts through a process known as a tax refund offset, managed by the Treasury Offset Program (TOP).
“If a taxpayer believes they don’t owe the debt, they can dispute the debt by contacting the agency listed on the notice that is servicing the debt or the Cross-Servicing program,” Brittany Benson, lead tax research analyst with The Tax Institute at H&R Block, told Newsweek.
“If the debt was referred to TOP due to delinquent nontax debt owed to federal agencies, taxpayers can use the Bureau of Fiscal Service process to dispute the debt. That process includes using a Cross-Servicing debtor dispute form that the taxpayers submit to the Department of Treasury to dispute the debt. Then, the agency that referred your debt can review the dispute,” she added.
The IRS might seize a taxpayer’s refund for several reasons.
The most common include unpaid federal or state income taxes, overdue child support payments, defaulted federal student loans, and unpaid unemployment compensation. In some cases, state governments can also request a tax refund offset to recover unpaid state taxes or benefits overpayments.
If the IRS offsets a refund, the taxpayer will receive a notice detailing the amount taken and the agency that requested the funds. If a taxpayer believes the offset was made in error, they must dispute it directly with the agency that initiated the request, not the IRS.
For those concerned about losing their refund, staying current on tax obligations and resolving outstanding debts before filing can help avoid an offset. Additionally, taxpayers can check for potential offsets by contacting the Treasury Offset Program’s call center.
