A refund offsetis when an IRS refund is reduced or intercepted to pay off delinquent debt, such as past-due child support, outstanding student loans, or unpaid state income tax.
You'll get an explanatory letter from the Bureau of the Fiscal Service if your refund is offset.The remainder of your refund will be processed as usual. An offset shouldn't delay it,unless your entire refund was applied to your debt.
More info about refund offsets, including contact info and the appeals process, is available in IRS Tax Topic 203.
FAQs
If you owe money to a federal or state agency, the federal government may use part or all of your federal tax refund to repay the debt. This is called a tax refund offset. If your tax refund is lower than you calculated, it may be due to a tax refund offset for an unpaid debt such as child support.
Why would my refund be offset? ›
If you owe a federal tax debt from a prior tax year, a debt to another federal agency, or certain debts under state law, the IRS may keep (offset) some or all your tax refund to pay your debt.
How to avoid tax refund offset? ›
Prevent an offset
Pay the full amount listed on the Intent to Offset Federal Payments (FTB 1102). Use the payment coupon included in the letter when you send your check or money order. To make a payment online, visit Payment options .
What does it mean for a payment to be offset? ›
An offset is when the federal income tax refund you would have received is used to pay all or a portion of a debt owing to a federal or state agency. If the full amount owed is not collected in one year, future offsets may be done to satisfy your debt.
What are taxable refunds credits or offsets? ›
Taxable Refunds, Credits or Offsets of State or Local Income Taxes. If you receive a refund of (or credit for) state or local income taxes in a year after the year in which you paid them, you may have to include the refund in income in the year you receive it.
How can I find out who offset my refund? ›
Tax Refund Offset
The debtor is notified in advance of any offset action to be taken. Individuals may call the TOP Interactive Voice Response (IVR) at 800-304-3107 to determine the contact information for the agency or state they owe.
What is the difference between offset and refund? ›
A tax offset is when your tax refund is withheld to pay your tax balances. If you have past-due taxes or a balance from another government agency but you're eligible to receive a refund this tax season, the IRS — or state tax agencies — may apply that refund to your past-due balance.
Can a tax refund offset be reversed? ›
The IRS may, for example, choose not to offset an overpayment against an outstanding federal tax refund because of undue hardship. However, the IRS's authority not to offset generally disappears once the offset has been done—it cannot reverse an offset.
What counts as a tax offset? ›
Offsets are used by the government to encourage specific outcomes, such as uptake of health insurance through the Private Health Offset, or adding money to your spouse's super through a contribution offset. They are also used to provide tax relief or financial support to certain groups in the community.
How much is the tax offset? ›
Low income tax offset (LITO)
If you earned: $37,500 or less, you will get the maximum offset of $700. between $37,501 and $45,000, you will get $700 minus 5 cents for every $1 above $37,500. between $45,001 and $66,667, you will get $325 minus 1.5 cents for every $1 above $45,000.
There are two types of refund offsets: Federal tax offset. Treasury Offset Program offset (effective 01/11/1999)
What causes an offset? ›
Your tax return may show you're due a refund from the IRS. However, if you owe a federal tax debt from a prior tax year, or a debt to another federal agency, or certain debts under state law, the IRS may keep (offset) some or all your tax refund to pay your debt.
What is an example of an offset? ›
An offset is a financial market strategy that requires a trader to take an opening position and then take a directly opposite position. For example, if you are long 100 shares of XYZ, selling 100 shares of XYZ would be the offsetting position.
What is the offset program for the IRS? ›
The Treasury Offset Program (TOP) collects past-due (delinquent) debts (for example, child support payments) that people owe to state and federal agencies. TOP matches people and businesses who owe delinquent debts with money that federal agencies are paying (for example, a tax refund).
Why did I not get my full tax refund? ›
Examples that could decrease your refund include: Math errors or mistakes; Delinquent federal taxes; State income taxes, child support, student loans or other delinquent federal nontax obligations; and.
Do you get a tax credit back as a refund? ›
Some tax credits are refundable. If a taxpayer's tax bill is less than the amount of a refundable credit, they can get the difference back in their refund. Some taxpayers who aren't required to file may still want to do so to claim refundable tax credits. Not all tax credits are refundable, however.
Can an offset be reversed? ›
The IRS may, for example, choose not to offset an overpayment against an outstanding federal tax refund because of undue hardship. However, the IRS's authority not to offset generally disappears once the offset has been done—it cannot reverse an offset.
What is the meaning of offset in income tax? ›
Offsetting is a term that is used within the world of tax. It basically means balancing money that you are owed with the money that you owe.
Why would the IRS hold my refund? ›
There are many reasons why the IRS may be holding your refund. You have unfiled or missing tax returns for prior tax years. The check was held or returned due to a problem with the name or address. You elected to apply the refund toward your estimated tax liability for next year.
