Taxes 2023: 6 Reasons the IRS May Take All or Part of Your Refund

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You’ve scrambled to file your tax return and are overjoyed to find out that you’re due a refund from the IRS. However, in certain situations, such as owing past state or federal taxes, all or part of your refund could be confiscated.

According to the IRS, “All or part of your refund may be offset to pay off past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or other federal nontax debts, such as student loans.”

If you have past-due debts owed to federal or state agencies, your refund may be used to pay them. This is called an offset by the government and either the IRS or the Treasury’s Bureau of the Fiscal Service (BFS) will send you a notification of offset after you file your return, according to the Taxpayer Advocate Service.

What Debts Could Be Offset?  

There are six reasons the IRS would take all or part of your refund as an offset, including:

  1. Past-due federal tax.
  2. State income tax owed.
  3. State unemployment compensation debts owed.
  4. Child support owed.
  5. Spousal support owed.
  6. Federal nontax debt (like student loans) owed.
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What To Do if the IRS Stops or Takes Your Refund?

You will receive a notice of offset from the IRS or BFS about why your refund is being partially or fully offset and what further action options you have. But the agency also recommended contacting the agency to which you owe the debt to find out if you may have an offset or if you have questions about it.

Take Our Poll: What Do You Plan To Use Your Tax Refund For?

If you have questions about an offset and delinquent individual or spousal debt assistance, you can call the Treasury Offset Program call center at 1-800-304-3107 for non-federal tax debt. You can contact the IRS at 1-800-829-1040 for federal tax debt.

In extenuating circumstances, you can request a review or a hearing by the IRS to prove why your taxes shouldn’t be offset. Reasons you might think a hearing is the right option for you would be incorrect information or debt balances, you’re in a bankruptcy process or your debt was discharged, according to LendEDU.

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If you’re unable to pay your living expenses, contact the Taxpayer Advocate Service at 1-877-777-4778 for assistance if you think the IRS is holding your refund. Additionally, contact a low income taxpayer clinic (LITC) to resolve your tax dispute.

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About the Author

David Nadelle is a freelance editor and writer based in Ottawa, Canada. After working in the energy industry for 18 years, he decided to change careers in 2016 and concentrate full-time on all aspects of writing. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry.
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