Unpaid Debts Can Affect Tax Refunds

By | April 23, 2014

Be careful if you have outstanding debts and are receiving a tax refund. Your tax refund could be affected by debt you have.


Tax Debts and Tax Refunds

If you have a past due debt, a refund of federal taxes could be reduced. The Treasury Offset Program (TOP) , you can use all or part of your refund to pay outstanding debts both federal and state.
Here are five things you should know about as tax refunds help you pay off debts.

  1. The Department of Treasury’s Bureau of Fiscal Service (BFS), which issues IRS tax refunds, has been authorized by Congress to conduct the Treasury Offset Program (TOP).
  2. Arrears such as child support, student loans, state income taxes or certain unemployment compensation debts could reduce your refund. The BFS may use all or part of your refund to pay off debt.
  3. The BFS will notify you if you apply a refund against an amount due. The notice will show the original amount of the refund and the amount remaining after being applied against debt repayment. It will also include the name of the agency receiving the payment, address and telephone number of the agency.
  4. If you believe you do not owe the debt or you want to question the amount of your refund was applied against the debt, you should contact the agency shown on the notice you received the payment. Do not call the IRS or to the BFS.
  5. If you filed a joint return and is not responsible for the debt, you may be entitled to all or part of the refund. You can request part of your refund, submitting Form 8379 , Injured Spouse Allocation.


Joint Tax Returns and Tax Debt – Form 8379

If you filed a joint return and you are not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund by filing Form 8379 (PDF), Injured Spouse Allocation. You may file Form 8379 with your original joint tax return (Form 1040 (PDF), Form 1040A (PDF), or Form 1040EZ (PDF)), with your amended joint tax return ( Form 1040X (PDF)), or by itself after you are notified of an offset. If you file a Form 8379 with your joint return, write “INJURED SPOUSE” in the top left corner of the first page of the joint return. The IRS will process your Form 8379 before an offset occurs. If you file Form 8379 with your original or amended joint tax return, it may take 11 weeks for electronically filed returns or 14 weeks if you file a paper return, to process your return.

Unpaid Debts Can Affect Tax Refunds

You can get forms at IRS.gov or by calling 800-TAX-FORM (800-829-3676).