IRS Tax Topic 203

Six Facts on Tax Refunds and Offsets
April 22, 2013 – IRS Tax Tip 2013-60

Certain financial debts from your past may affect your current federal tax refund. The law allows the use of part or all of your federal tax refund to pay other federal or state debts that you owe.

Here are six facts from the IRS that you should know about tax refund ‘offsets.’

  1. A tax refund offset generally means the U.S. Treasury has reduced your federal tax refund to pay for certain unpaid debts.
  2. The Treasury Department’s Financial Management Service is the agency that issues tax refunds and conducts the Treasury Offset Program.
  3. If you have unpaid debts, such as overdue child support, state income tax or student loans, FMS may apply part or all of your tax refund to pay that debt.
  4. You will receive a notice from FMS if an offset occurs. The notice will include the original tax refund amount and your offset amount. It will also include the agency receiving the offset payment and that agency’s contact information.
  5. If you believe you do not owe the debt or you want to dispute the amount taken from your refund, you should contact the agency that received the offset amount, not the IRS or FMS.
  6. If you filed a joint tax return, you may be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund, file Form 8379, Injured Spouse Allocation. Form 8379 is available on IRS.gov or by calling 1-800-829-3676.

Topic 203 – Refund Offsets for Unpaid Child Support, Certain Federal and State Debts, and Unemployment Compensation Debts
The Department of Treasury’s Bureau of the Fiscal Service (BFS) issues IRS tax refunds and Congress authorizes BFS to conduct the Treasury Offset Program (TOP). Through the TOP program, BFS may reduce your refund (overpayment) and offset it to pay:

Past-due child and parent support;
Federal agency non-tax debts;
State income tax obligations; or
Certain unemployment compensation debts owed to a state. (Generally, these are debts for (1) compensation paid due to fraud, or (2) contributions owing to a state fund that were not paid due to fraud).
You can contact the agency with which you have a debt to determine if your debt was submitted for a tax refund offset. You may call BFS’s TOP call center at the number below for an agency address and phone number. If your debt was submitted for offset, BFS will reduce your refund as needed to pay off the debt and send it to the agency you owe. Any portion of your remaining refund after offset is issued in a check or direct deposited as originally requested on the return.

BFS will send you a notice if an offset occurs. The notice will reflect the original refund amount, your offset amount, the agency receiving the payment, and the address and telephone number of the agency. BFS will notify the IRS of the amount taken from your refund. You should contact the agency shown on the notice if you believe you do not owe the debt or if you are disputing the amount taken from your refund. If you do not receive a notice:

Contact the BFS TOP call center at 800-304-3107 or TDD 866-297-0517, Monday through Friday 7:30 a.m. to 5 p.m. CST.
Contact the IRS only if your original refund amount shown on the BFS offset notice differs from the refund amount shown on your tax return.
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 one of the following ways:

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 received notification of an offset.
If you are filing a Form 8379 with your joint return or amended return, write INJURED SPOUSE in the top left corner of the first page of the joint return.
The IRS can process your Form 8379 before an offset occurs. If you file Form 8379 with your original return, it may take 11 weeks to process an electronically filed return or 14 weeks if you filed a paper return. If you file the Form 8379 by itself after a joint return has been processed, then processing will take about 8 weeks. To avoid delays, be sure to follow the Form 8379 Instructions (PDF).

When filing Form 8379 by itself, you must show both spouses’ Social Security numbers in the same order as they appeared on your joint income tax return. You, the injured spouse, must sign the form. Follow the instructions on Form 8379 carefully and be sure to attach the required forms W-2s and 1099s showing federal income tax withholding to avoid delays. Do not attach the previously filed joint tax return to the Form 8379 when filing it by itself. Send Form 8379 to the Service Center where you filed your original return and allow at least 8 weeks for the IRS to process your Form 8379. The IRS will compute the injured spouse’s share of the joint return, and if you lived in a community property state during the tax year, the IRS will divide the joint refund based upon state law. Not all debts are subject to a tax refund offset. To determine whether an offset will occur on a debt owed (other than federal tax), contact BFS’s TOP call center at 800-304-3107 (866-297-0517 for TTY/TDD help).

IRS Tax Topic 203