Tax Refund Offset to Pay Obligations

March 31, 2015

The IRS released a new tax tip today that I thought was worth passing on. It relates to the tax refund offset and certain federal or state debts.

Under the Treasury Offset Program, the IRS is authorized to use all or part of your federal refund to settle certain unpaid federal or state debts.

Here are things to know about what is called a tax refund offset:

While it probably comes as no surprise that past due federal tax debt may reduce your tax refund, what you may not know is that the IRS may also use part or all of your tax refund to pay certain other debts such as:

• Past-due child and parent support;
• Federal agency non-tax debts, such as a delinquent student loan;
• State income tax obligations; and
• Certain unemployment compensation debts owed to the state.

Significantly, before the IRS offsets part of your refund to pay a tax debt, it’ll first mail you a notice of its intention to do so. The notice will list the original refund and offset amount, include the agency that received the offset payment and give appropriate contact information.

If you want to dispute the proposed tax refund offset, you need to contact the agency that received the offset payment, rather than the IRS.

Lastly, if your spouse is solely responsible for the back taxes or tax debt, you may be entitled to part or all of the offset if you filed a joint tax return with your spouse. To get your part of the refund, you need to file a Form 8379, Injured Spouse Allocation. For assistance with this complex area of the tax law, contact an experienced New York tax attorney at Mackay, Caswell & Callahan, P.C. today. With over 30 years’ of tax experience and offices throughout New York State, we can offer experienced tax help.

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