If you owe unpaid child support, back taxes or federal student loan debt, don't count on getting back a tax refund. Government creditors can notify the Internal Revenue Service of your delinquent debts and request that the IRS withhold your tax refund and direct it to the appropriate government agency as payment for the debt you owe.
After filing your tax return, you won't be left waiting for a tax refund that never arrives. If a creditor requests that the IRS withhold your refund, it will notify you of the pending tax refund offset before it occurs. Your tax refund offset notice will explain the process and, in some cases, give you instructions for contesting the offset.
Preventing an Offset
Paying the debt is a sure way of avoiding an offset. If your pending tax garnishment is the result of unpaid taxes, simply making payment arrangements with the IRS is enough to prevent the offset from occurring. If your offset is the result of unpaid student loans and losing your tax refund will place you and your family under considerable financial duress, you can contact the U.S. Department of Education and request a hearing to contest the pending garnishment. Your state laws determine the grounds for appealing a tax refund offset for unpaid child support.
Any state tax refund you qualify for may also be subject to an offset, depending on the debt you owe. The state may withhold your refund if you fall behind paying child support, spousal support, property tax or other state tax payments you owe. Before garnishing your state tax refund, your state's department of revenue will notify you of the pending offset and give you the opportunity to pay off the debt and prevent the offset from occurring.
If your tax refund does not cover the entire amount you owe and you neither pay the outstanding balance nor make arrangements to pay it before you file taxes the following year, your creditor may garnish your tax refund again. Eligible creditors can garnish your tax refund repeatedly until you pay your debt in full. Whether or not you receive notice of future tax refund offsets depends on the policies of the agency that originally garnished your tax refund. For example, the state of Georgia sends an initial offset notice if it intends to garnish a debtor's federal and state tax refunds for past due child and spousal support payments. The paperwork notes that the state may intercept any future refunds the debtor is scheduled to receive without further notification.
- WLTX; How Can My Income Tax Refund Be Garnished?; Jerome Collins et al.; January 2010
- IRS.gov: Topic 201 -- The Collection Process
- National Consumer Law Center: Tax Refund Offsets
- North Carolina Department of Revenue: Refund Offset Frequently Asked Questions
- Georgia Office of Child Support Enforcement: OCSE Pre-Offset Notice
- U.S. Department of the Treasury: Tax Refund Offset; March 2011
- U.S. Department of Education: Treasury Offset Program