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You have filed your taxes, and you are anxiously awaiting your refund. For many, this refund is a welcome infusion of cash to be used for a well-needed vacation or to pay off some overdue bills. But this year, instead of getting your refund, the IRS sends you a letter explaining that they are seizing your income tax refund instead of sending you the hefty check you were counting on. This act of taking your refund to pay off any unpaid governmental debt you owe is called a “refund offset.”
Or maybe you haven’t filed your income taxes yet, but you want to make sure you’ll receive the refund check you’re expecting. Today, we’ll take a look at some of the reasons the IRS may seize your income tax refund and what, if anything, you can do to get it back.
7 Reasons the IRS May Withhold Your Refund
There are several reasons the IRS may withhold your refund. If you get a refund offset letter from the IRS, the letter should explain why they withheld your refund. The IRS handles the refund offsets for past-due federal taxes. The Bureau of Fiscal Service handles all other offsets. That being said, these are the seizure reasons you need to be aware of so that you may protect your refund in the future.
Federal Income Taxes
If you have unpaid federal income taxes, the IRS may withhold your refund to apply it to those unpaid taxes. Even if you owe back taxes and are on a payment plan to pay those taxes, the IRS will still use your refund to apply toward those taxes until your prior debt is paid off.
State Income Taxes
If you owe state income taxes to any state, the IRS may withhold your refund to pay off that debt. This is regardless of whether you still reside in that state or not. And just like with federal taxes, even if you have a payment plan in place, the IRS can still seize your refund to apply toward the debt and hasten repayment.
Unemployment Compensation
If your state unemployment division has determined that you received more unemployment compensation than you were entitled to, they will demand you return the overpayment. If you have an unpaid state unemployment compensation debt, then the IRS may hold your refund and apply it toward that debt.
Unpaid Federal Debts
There are a few federal debts that the IRS may use your refund to pay that are not tax-related. For example, if you have outstanding student loan payments due and aren’t on some sort of deferment plan, they could apply your refund toward that debt. Other possibilities are unpaid HUD loans and any fees, fines, and penalties due to other federal agencies.
Child Support
If you are delinquent in paying your court-ordered child support, the state’s child support agency may send a request to the Treasury Department (IRS) to withhold your tax refund. The child support agency should notify you before taking this action. If approved, the agency will apply the withheld refund money to your unpaid child support debt. Once the amount has been removed from your refund, you will get a notice from the Bureau of Fiscal Service stating how much money was withheld.
Spousal Support
You may have court-ordered spousal support as part of a child support order. If you are behind on your spousal support payments, the same state agency may make a request to the Treasury Department to withhold your tax refund.
Other Reasons
There are other reasons that the IRS may withhold your refund. These could include:
The IRS questions the accuracy of your return: This could happen if there’s a mathematical error on your return, if you took an erroneous deduction or credit, or if the IRS is auditing one of your previous returns.
You have one or more unfiled back tax returns: If you file a tax return for the current year but have not filed for one or more previous years, the IRS may hold your refund until you file and pay any related taxes.
There’s a problem with your IRS tax account: This could be if the IRS suspects identity theft or if there is a discrepancy related to a dependent.
What to Do to Get Your Refund Back
In most cases, your first step is to determine exactly why the government seized your refund. You should have gotten a notice of the reason at the time you were expecting to receive your refund check. If you have any questions, the notice will come with a phone number or other contact information for you to call to get further information. If you believe that the government seized your funds in error, you will have to work with the state or federal agency to provide proof of the mistake and get your refund back.
However, the best thing that you can do to protect your refund is to take proactive steps.
Be sure that your federal and state taxes and other debts are all paid in full and on time.
Be sure to file all of your tax returns on time.
Be sure that your child and spousal support payments are paid in full and on time.
Minimize your risk by increasing your exemptions on your W-4. This will lower the income taxes taken from your paycheck and minimize your refund.
If your spouse owes one of the debts outlined above and you file a joint tax return, be sure to also file a Form 8379: Injured Spouse Allocation. This will ensure that only your spouse’s portion of the refund is applied to those debts.
If all else fails, you can speak to an attorney for help.
We’re Here for You!
Do you have questions regarding how you can best protect your tax refund in the future? Do you have questions about any money the IRS has seized? If so, the family law attorneys at the Jarbath Peña Law Group can get you the answers you need! We are seasoned family law attorneys with over 20 years of combined experience. We’ve handled everything from simplified divorces to the most contentious family trials. We are a boutique law firm located in Miami and serving the greater South Florida area. Call us today at 305-615-1005 or contact us online to find out how we can put our passion for justice and experience to work for you!