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It’s a fact of life that occasionally financial troubles come up. Perhaps something happened and you fell behind on your student loans or child support. You may be wondering if the IRS can seize your income tax refund. The short answer is yes.

Now that it’s tax season, we wanted to explain under what circumstances your refund could be seized and who can take it. Finally, we’ll give you some resources you can use if you believe the seizure was made in error.

Who Can Take My Refund?

Technically speaking, the IRS handles the seizure of all federal tax returns. They call this an offset, probably because it sounds better.

This doesn’t necessarily mean that the IRS is getting the money. While the agency will make sure it gets the first bite at the apple for any federal taxes that have gone unpaid, you might also see an offset for back child support or other federal debts.

Private creditors can’t get their hands on the actual return, but that may change when the money goes into your account, depending on the laws of your state.

If you owe the U.S. government money, you may get a CP504 notice. The notice details the amount you owe and gives you a due date for paying off the balance. If that balance goes unpaid, the federal government can take your state income tax refund.

It’s better to get the payment taken care of because things only escalate from there. If your state tax refund doesn’t cover the amount owed, you’ll get a notice that you have the right to appeal to the IRS. They can take things like your income, personal and business assets, and Social Security payments away to cover unpaid federal taxes.

You may have the option of setting up a payment agreement to pay the government back in installments.

Finally, if your federal taxes, child support and all other federal debt is satisfied, the IRS return may be used to pay off state and municipal debts.

I Can Prove I Don’t Owe Anything

Let’s say you know you don’t owe anything and there’s been a mistake. If that’s the case, you can appeal.

You’ll receive notice from local authorities that may include the right to a hearing. The U.S. government has a similar appeals process for federal taxes.

It Wasn’t Me

We marry people because we love them, not because they’re good with their money. That’s what the romantic in me would like to think, at least.

If you file jointly, your return could be taken to cover your spouse’s overdue obligations, but you may still be entitled to a portion of the return that is yours. You’ll want to file Form 8379, otherwise known as an Injured Spouse Allocation, in order to get your money back.

In summary, you might be okay for a while, but the government is going to find a way to obtain any funds you owe eventually. If you still have questions, put them in the comments section and we’ll do our best to answer them. We recommend you consult a tax adviser for expert advice.

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