Tax Refund Offset from the Treasury Offset Program (TOP)

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If you didn’t receive the full refund amount you were expecting, one reason for that may be that the missing amount was used to pay some past unsettled debts.

The Treasury Offset Program (TOP) is an arm of the government, namely Bureau of Fiscal Service and its Debt Management System, that processes request by private and government agencies to withhold portion of your refund to pay for certain liabilities.

During the tax season many Americans expect refunds, but unfortunately, many of those refunds will be lowered for some of the following reasons:

  • child support payments – past and current
  • taxes owed in prior years – federal and state
  • past due student loan debts
  • debts related to unemployment compensation, especially if benefits were claimed fraudulently
  • shared responsibility payment owed to the IRS related to the Health Care Law

If the TOP decides to offset portion, or even the entire amount, of your refund you will receive a letter detailing the original amount you were supposed to receive, how much was withheld, and what agency received the offset amount. There is nothing you can do at that time, but you do have an opportunity to appeal that decision. The TOP lists a contact number of the agency where the funds were sent and you will get your chance to present your case directly to that institution. The IRS is unable to solve this predicament for you as it merely receives already offset amount that is later disbursed to you. The only reason to call IRS is when the refund amount stated on your offset notice is different from the one you anticipated (as indicated on your tax return).

What if I wasn’t responsible for the debt?

If you filed a joint tax return and your spouse is responsible for all debt settlements, you can request to have your portion of refund paid out entirely. The request form can be submitted after you received an offset letter or can be attached to your 1040, or 1040X, if you expect an offset to happen. Form 8379 is a short two-page form that resembles a questionnaire. The last part asks for joint and individual income as reported on W2 form so make sure you have access to that information.

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