Getting A Tax Refund if You Owe The IRS

One best part of tax season is receiving your tax refund. It’s usually like a gift to yourself after having money taken out of your paycheck all year long. But have you been checking your bank account or the mail weekly wondering why your refund hasn’t shown up? One scenario may be the reason behind your barren account and mailbox: the IRS seized your refund Many taxpayers wonder, “Can you get a tax refund if you owe the IRS?” Owing taxes to the federal government is never a perfect situation, but in the event that you do, it’s significant to know that the IRS can use all or a portion of your refund to offset any debts you owe. When Can the IRS Take My Refund? Can you get a tax refund if you owe the IRS? This isn’t feasible in most cases. The amount they take depends on how much you owe the IRS, but if you’re indebted to the IRS, they have the power to garnish your tax refund to offset personal debts, such as back taxes, child and spousal support debt, student loan debt, and more. Back Taxes Will the IRS take your refund if you have back taxes? Yes. Back taxes refer to taxes that are unpaid or partially paid at the federal, state, or local level. Owing back taxes at any of these levels can lead to your tax refund being garnished. When part or all of your tax refund is used to offset back taxes, the IRS will send you an IRS offset notice that warns you of their aim to offset a portion or the entirety of your federal tax refund. In addition, if you’ve elected to manage your debts through a repayment plan, such as an IRS installment agreement, the IRS will still take your refund and use it to pay off your tax debt. If you have back taxes owed, refer to our guide to paying off IRS debt. Treasury Offset Program When you owe money to the federal government, the Bureau of Fiscal Service’s Debt Management Services will collect your delinquent debts that are owed to federal agencies and states. This is known as the Treasury Offset Program (TOP), which receives information from creditor agencies, such as the Department of Education, that submit delinquent debts that qualify for collection by offset. Before the IRS prepares to send you your tax refund, they look through information provided by creditors to see what you might owe. If the IRS’ database matches your tax identification number (TIN) with the TIN provided by a debtor, they will withhold part or all of your tax refund to satisfy the debt. IRS Priority One choice for some taxpayers to relieve themselves from tax debt is by filing for bankruptcy. The most regular type of bankruptcy for individuals is Chapter 7 bankruptcy. This type of filing liquidates your assets to help pay off your creditors. But who gets the money first? That’s up to the IRS to decide. When filing for bankruptcy, the IRS lists three different payment priorities for creditors: • Priority and non-discharge able unsecured tax debt, like trust fund taxes, taxes that have not been assessed but are still asses sable, taxes on returns where the due date of the return is within three years of the bankruptcy filing date, and taxes assessed within 240 days of the filing date. These debts cannot be discharged and must be paid first before any other debt. • Non-priority and non-discharge able unsecured tax debt, such as taxes on returns which have not been filed, taxes on fraudulent returns, taxes for years where the taxpayer evaded taxes, and taxes filed late within two years of the filing date. While these debts are not the top priority, they cannot be discharged. Non-priority and discharge able unsecured tax debt, which are unsecured taxes that fall into the catchall of non-priority and discharge able, which means these debts can be forgiven and you won’t have to pay them. Child & Spousal Support If you’re a parent who’s lagging behind on paying court-ordered child support, your state’s child support agency will send information to the Treasury Offset Program and inform them you have delinquent child support debt. When the Treasury Department receives this information, they will send you a pre-offset notice letting you know how much you owe, how the offset program works, and ways you can contest your child support debt. The TOP will then use part or all of your tax refund to pay off your back payments. The same process works for spousal support. If you’re behind on court-ordered spousal support that’s part of your child support order or behind on court-ordered alimony support, the TOP can use all or part of your tax refund to offset your overdue payments. Additional Debts Back taxes, child support payments, and spousal support payments aren’t the only personal debts that can cause the IRS to take your refund. Along with these debts, the IRS can take your refund if you’re behind on student loan payments or state unemployment compensation. If you default on federally-insured student loans, the government has the power to seize your tax refund to pay for your outstanding student loan debt. Along with this, the U.S. Department of Education has the ability to oblige your employer to garnish up to 15 percent of your income until your defaulted loans are satisfied. Along with student loans, the IRS can seize your tax refund if you collected unemployment compensation you weren’t eligible for. Whatever the case may be, your state’s unemployment program can request that the U.S. Department Treasury offsets your tax refund. How to Get a Full Tax Refund Depending on how many allowances you had held back, you can be due a fairly hefty tax refund. In order to collect the full amount of your tax return and prevent your tax refund from being garnished, it’s best to pay your taxes on time and in full. If you have any tax debt or other debts, such as student loans or child support, do your best to repay some or all of the debt. This will leave more money in your tax refund. It’s also vital to remember that the IRS isn’t perfect, which means they can make mistakes. If you believe the IRS made an error seizing your tax refund, you have 65 days to contest the notice and fight for your refund.