What Does It Mean To Have Your Tax Refund Offset?

Instead of receiving the nice tax refund check you’ve been expecting, you get a notice in the mail. It says your tax refund has been offset. What does this mean?

A refund offset means the government has determined that you owe a debt and has applied your tax refund towards this debt. Tax refunds can offset for many types of debts—not just federal tax debts—through the Treasury Offset Program (TOP).

Refund Offsets For Federal Tax Debt

If you owe the IRS money, they will seize your tax refund check. There’s no way around this other than to resolve your tax problems.

Even while you are making payments as part of an installment agreement, the IRS may continue to seize your tax refunds and apply them towards your outstanding balance. You could adjust your withholding amounts on your W-4 or reduce your estimated tax payments, which would reduce the amount of your refund.

However, if you reduce these amounts too much, you could face underpayment penalties.

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