Is The IRS Withholding Some or All of Your Refund?

Barry Fowler6

If the IRS kept all or a portion of the federal refund you were expecting, it may be because you owe money for certain delinquent debts. If that is true, the IRS or the Department of Treasury’s Bureau of the Fiscal Service (BFS), which issues IRS tax refunds, can offset or reduce your federal tax refund or withhold the entire amount to satisfy the debt.

Here are some important facts you should know about tax refund offsets:

1. If you owe federal or state income taxes your refund will be offset to pay those tax liabilities. If you had other debt such as child support or student loan debt that was submitted for offset, BFS will take as much of your refund as is needed to pay off the debt, and send it to the agency authorized to collect the debt. Any portion of your refund remaining after an offset will be refunded to you.

2. The law prohibits the IRS from using liens or levies to collect any Affordable Care Act individual shared responsibility payment (the tax for not having required minimum essential health care coverage). However, if you owe a shared responsibility payment, the IRS may offset that liability against any tax refund that may be due to you.

3. You will receive 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.

4. You should contact the agency shown on the notice if you believe you do not owe the debt or you are disputing the amount taken from your refund.

5. If you filed a joint return and you are the spouse who is not responsible for the debt, but are entitled to a portion of the refund, you may request your portion of the refund by filing IRS Form 8379, Injured Spouse Allocation If you know that your spouse has outstanding debts and anticipates an offset, you can attach Form 8379 to your original Form 1040, Form 1040A, or Form 1040EZ. Or it can be filed by itself after you are notified of an offset.

6. If you file a Form 8379 with your return, write “INJURED SPOUSE” at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs.

7. If you are filing Form 8379 by itself, it must show both spouses’ social security numbers in the same order as they appeared on your income tax return. You, the “injured” spouse, must sign the form. Do not attach the previously filed Form 1040 to the Form 8379. Send Form 8379 to the Service Center where you filed your original return.

8. If you reside in a community property state, overpayments (refunds) are considered to be joint property and are generally applied (offset) to legally owed past-due obligations of either spouse. There are exceptions, so please call for additional details if this rule affects you.

9. The IRS will compute the injured spouse’s share of the joint return for you. 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.

For assistance with IRS withheld refunds or completing Form 8379, please connect with Barry Fowler.

Original Post By:  Barry Fowler

Article Highlights:

• Tax Refund Offsets

• Child Support, Student Loan Debt

• ACA Shared Responsibility Payment

• Back Taxes

• Form 8379, Injured Spouse Claim

• Community Property

Barry Fowler is licensed to represent taxpayers before the Internal Revenue Service (IRS) and is a longstanding member of several tax industry professional organizations including the National Association of Enrolled Agents (NAEA), National Association of Tax Preparers (NATP), Texas Society of Enrolled Agents (TSEA), and the American Society of Tax Problem Solvers (ASTPS). With experience in the tax and finance industry spanning over twenty years, Fowler’s expertise includes tax resolution, personal financial planning, tax return preparation, financial statements, and general ledger bookkeeping. He has been instrumental in helping hundreds of people resolve complex tax issues with the IRS.

One comment

  1. Norman Diamond says:

    If the IRS ALLEGES that you owe federal penalties, even when you don’t owe tax because your tax is overpaid, your refund will be offset to partially pay those alleged penalties.

    If US Tax Court ruled that the IRS shall not collect an alleged penalty by levy or lien, the IRS will still partially collect by offset.

    If Tax Court ruled that Tax Court doesn’t have jurisdiction and Court of Federal Claims ruled that Court of Federal Claims doesn’t have jurisdiction, the IRS will partially collect by offset.

    Even if the IRS has alleged more penalties owing than you can afford, if the IRS hasn’t threatened a levy or filed a lien then Tax Court doesn’t have jurisdiction. Even if the IRS has alleged more penalties owing than you can afford, if you haven’t paid then then Court of Federal Claims doesn’t have jurisdiction.

    Did you think the Fifth Amendment would prevent depriving you of property until due process takes place? Think again. IRS agents are more powerful than pieces of paper written by dead white males. IRS agents are even more powerful than the Supreme Court, Flora v. US. No court is going to stop them.

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