Have you ever had your tax refund reduced before you even receive it? That unpleasant phenomenon is called an offset. Here is the skinny on what an offset is, why they happen and who decides they will happen.
Unpaid financial obligations that you incurred in your past
can result in the reduction of your tax return in the form of an offset. Some
of the debts that can trigger an offset include: unpaid child support, student
loans or income taxes due to the state in which you live. During the evaluation
of your tax return, the Treasury Department’s Financial Management Service
(FMS) division steps in to assess whether any of these unpaid obligations
exist. If they do, the FMS will determine how much your refund should be
reduced to apply funds toward these debts. They can withhold all of the refund
or just a portion. In any event, you will receive a notice from the FMS alerting
you that an offset is being applied and stating the full amount of your refund,
the amount you will actually be receiving, and the name and contact information
of the agency where the funds will be sent.
To dispute the offset, contact the agency where the funds
are being sent (not the IRS or Financial Management Service). Any negotiations
or refunds will have to come from that agency. Once the offset has been
determined, the FMS no longer manages the process. If you filed a joint return
and the agency to whom the funds were sent determines that a refund is
appropriate, you or your spouse may individually be eligible for some or all of
those funds. This might apply if the obligation was incurred as one spouse’s
Contact us if you receive notification of a tax
refund offset. We can assist with identifying whether the offset is legitimate.