Regardless of your financial circumstances, several types of debt can follow you throughout your life until they are paid in full. If you owe back payments on child support, tax obligations, or student loans, your creditors can ask the federal government to help them collect what you owe to them. A tax refund offset occurs when the government lays claim to some or all of your state or federal income tax return. If you know that you owe one of these types of debt, you can benefit by knowing more about the tax refund offset program and what your rights are as a taxpayer.
Proper Notification
The IRS must notify you in writing that you owe money to a qualifying creditor and that your income tax return will be claimed to satisfy part or the entire obligation. The notification should include the amount of money that you owe, as well as the name and contact information of the creditor. You must be notified well enough in advance to allow you to prepare yourself and take the proper remedying steps if applicable.
Options after Notification
After you have been notified of the government’s intent to offset your tax refund, you have several options available to you to contest the debt or prevent all of your refund from being claimed. If you disagree that you owe the amount, you have 20 days after you receive notice to examine your records and request an inspection of your loan records. If you choose not to request an inspection, you could request a review of the debt and your records. You have 65 days after receiving notice to exercise this option.
If you filed a joint return with your spouse and you want some of your refund to be allocated to him or her, you can file Form 8379 found on the IRS website and make this request. This option could apply if you alone are in default on a student loan or back child support. Your spouse could be entitled to a portion of the refund if the debt is not jointly owned.
Remedying the Debt and Preventing Future Offsets
Having your income tax offset by the Treasury Department can be stressful and potentially damaging to your personal finances. Fortunately, you may be able remedy the obligation, particularly if you are late on student loan payments. You can contact your loan company and ask for a deferment or forbearance on your loan, which will bring your debt current and prevent a tax refund offset next year. You can also dispute being late on payments if you have proof that you have been making on-time payments or satisfied the loan altogether.
Certain debts like child support and student loans can remain with you until they are paid off entirely. When you are in default, you could be subject to a tax refund offset. These facts can help you prepare for this action and know your rights as a private citizen.
