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What Is A Refund Offset?


When taxpayers pay too much to the federal or state governments, they are often entitled to a tax refund, or reimbursement for the excess amount. Tax refunds are issued by the Department of Treasury’s Bureau of the Fiscal Service (BFS), which is also authorized to reduce taxpayer refunds and offset them to pay other amounts that the taxpayer owes.

When Can Refunds be Reduced?

In addition to issuing refunds, the BFS also conducts the Treasury Offset Program (TOP), under which they can reduce taxpayer refunds to offset certain debts if those debts meet certain criteria. These debts include:

  • A taxpayer’s overdue child support;
  • Federal agency non-tax debts;
  • Unpaid state income tax obligations; and
  • Reimbursement for unemployment benefits paid due to fraud, or for contributions to a state fund that weren’t paid.

Any portion of a remaining refund that is left after paying these debts will be issued to the taxpayer in a check or in the form of a direct deposit to a particular account. Taxpayers who find that their refund is lower than they expected should contact the agency to which they owe the debt to ensure that the funds were submitted as an offset and that the amount was not reduced due to a mistake or a clerical error.

Tax Offset Notice

Before issuing a reduced refund, the BFS must first send a notice to the taxpayer. This notice should include the original refund amount, as well as:

  • The offset amount;
  • The name of the agency to which the payment is owed; and
  • The contact information of that agency.

The BFS also notifies the IRS of the amount taken from the refund once the taxpayer’s specific refund date has passed. It is possible to dispute these offsets, however, so if you don’t believe that you owe a debt or disagree with the amount taken, you can contact the BFS. Reaching out to the IRS, however, is only necessary if the original refund shown on the offset notice is different from the refund amount shown on a taxpayer’s return.

Filing an Injured Spouse Claim

Taxpayers who filed joint returns and were not responsible for a tax debt for which their refund has been offset can request that their portion of the refund be returned. To do so, they’ll need to fill out Form 8379 and submit it:

  • With their original joint tax return;
  • With an amended joint tax return; or
  • By itself after receiving notification of an offset.

Fortunately, the IRS can process these forms before an offset actually occurs. It’s important to note, however, that processing these forms can take between eight and 14 weeks.

Consult with an Experienced Tax Lawyer

If your refund was offset and you have questions about disputing that reduction, feel free to call dedicated CPA, former FBI Special Agent, and experienced Florida tax lawyer Ronald Cutler, P.A. for advice. You can set up a free one-on-one consultation by calling 386-490-9949 or by completing one of our online contact forms.