Three Reasons the IRS Can Take Your Refund

10 Comments
March 2, 2012 ‐ By P.S. Jones

For many of you, tax time means a big fat check in the mail courtesy of the earned income credit, dependent deductions and child related credits. But before you start counting your dollars, remember that just because the numbers say you’re getting a refund doesn’t mean you’ll actually see that money. The U.S. Department of Treasury’s Financial Management Service (FMS) regularly using tax refunds to offset certain type of debts.

If the FMS takes your refund, you find out through the mail. You receive a notice in the mail instead of your check that states that how much of a refund you were entitled to and how much you will receive. It also tells you which debt the refund went to repay and how to contact that organization directly. You must contact the organization, not the IRS, about your refund offset.

And it’s not just your own debts that can intercept your tax refund. If you file jointly with your spouse, his debts can affect your return as well. At least if that happens, you can fill out Form 8379–Injured Spouse Allocation to try to convince IRS that the debt is not yours and persuade them to release your portion of the joint return.

So what kinds of debts can affect your refund? Generally, it’s any debt owed in association with a government agency. Here are a few common examples:

Student Loans
Student loans are one of the few debts that never go away. Because the government backs them, you can’t use bankruptcy proceedings to get out of them. Although they are low or even zero interest loans, you must start paying them back when you leave school. If you don’t, the government can go after your tax refund, among other things.

Unemployment Payback
As a rule, you don’t have to pay back unemployment insurance benefits because they are funding mostly by the taxes your employer paid on its payroll. However, if you receive benefits you weren’t entitled to, the state government makes you pay them back. And if you don’t pay them back, the state can request that your federal income tax refund be held to pay the debt.

Child Support
Child support is probably the most common reason that hold up tax refunds. Most states take child support payments seriously, garnishing your wages, taking away your drivers license, or even locking you up for failure to pay. The FMS will also take your tax refund to offset your child support debts.

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  • Msobjective

    i’m guessing some of you don’t file taxes or understand the mental stress that goes with dealing with IRS. There’s nothing wrong with that photo. That photo is an accurate depiction of what the IRS does to every, huge pain in the a**- headache. I file my own taxes. I finally figured out how the tax system works, not 100% but i’m getting there. As for school loans, i’m just happy that i get that interest at the end of the year up to $3,000!. My loan is close to 80k, so i know i’m getting a check every year just from the school loans. As far as refunds go, i want to break-even. I would rather get my money each pay check than give the IRS interest free loan. The IRS has no problems coming after us if we don’t pay our interest, we should be able to charge the IRS for hold on to our money for an entire year. 

  • IllyPhilly

    Only one solution, pay ya damn bills!!! IDGAF what the problem is, pay ya sh*t.

  • Name Not Important

    If the writer had enlisted a proofreader… 

    I may have read the entire article. GEEZ!

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  • L-Boogie

    Good information.

  • tastythoughts

    i know right…lmao

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  • Ms. Spring

    Why post a picture that has nothing to do with the article.  Lame.

  • Guest

    I didn’t even read the article…that photo has got to go.