Stopping an IRS Offset: Steps to Protect Your Refund

Quick summary

Act fast. If your federal refund was reduced or withheld, verify the debt, gather proof, contact the creditor that referred the debt, and use available IRS forms or advocacy channels to dispute or resolve the offset.

Why offsets happen (brief)

Federal refunds can be reduced through the Treasury Offset Program (TOP) to collect certain past-due debts, including unpaid federal taxes, defaulted federal student loans, past-due child support, and some state tax debts (U.S. Department of the Treasury; IRS). For an overview, see FinHelp’s guide on How the Treasury Offset Program Can Affect Your Federal Refund.

Step-by-step: How to stop an IRS offset

1. Read the notice you received

• Agencies that refer debts to TOP generally send a notice explaining the debt and how to challenge it. Keep the letter—it lists the referring agency and contact details (Treasury/IRS guidance).

1. Verify the debt

• Confirm you actually owe the amount claimed. Check account statements, loan servicer records, or state agency records. Mistakes happen (wrong SSN, identity mix-up, or paid debt).

1. Contact the creditor that referred the debt

• The offset is usually handled by the agency that submitted the claim (for example, state tax agency, Department of Education for defaulted federal student loans, or state child support office). Contact that agency’s collections unit to ask for an account statement, dispute procedures, or a repayment option.

1. Use the proper IRS forms or claims if your refund was offset in error

• Injured spouse relief: If you filed a joint return and your spouse’s debt caused the offset, file Form 8379 (Injured Spouse Allocation) with the IRS to claim your portion of the refund.
• Taxpayer Advocate: If you’re facing financial hardship or normal channels aren’t resolving the offset, contact the Taxpayer Advocate Service (Form 911) for independent help (see How to Engage the Taxpayer Advocate Service).

1. Appeal or request a review with the referring agency

• Most agencies provide an administrative review and appeal rights before or after TOP referral. Follow their dispute process and meet any deadlines in the notice. Keep written records of all communications.

1. Negotiate, settle, or pay when appropriate

• If the debt is valid, negotiate a payoff, request a payment plan, or explore loan rehabilitation (for defaulted federal student loans) to stop future offsets. For IRS tax debts, consider an installment agreement or Offer in Compromise if eligible (IRS guidance).

1. If identity theft or an error caused the offset

• If you suspect identity theft or that the offset applied to the wrong person, file an identity theft report with the IRS and the referring agency. Keep copies of police reports, FTC IdentityTheft.gov recovery steps, and correspondence.

Timeline and deadlines

• Deadlines and timelines vary by referring agency. Respond promptly to notices—delays can close off appeal windows. If the IRS is involved and delays threaten financial hardship, the Taxpayer Advocate Service can sometimes expedite help (see FinHelp’s Taxpayer Advocate Service)).

What I’ve seen in practice

In my work helping clients, a common win is filing an injured-spouse claim when only one spouse owes the debt. Another effective route is quickly contacting the referring agency and asking for a temporary hold while the account is reviewed—many offsets result from old records that can be corrected with documentation.

Common mistakes to avoid

• Ignoring the notice: Silence removes opportunities to dispute or arrange payments.
• Contacting the IRS only: The offset is usually controlled by the agency that sent the claim. You must work with that creditor first.
• Missing deadlines: Appeal periods differ—missing one can forfeit your rights.

Related resources (FinHelp)

• How Refund Offsets Work and When to Challenge Them: https://finhelp.io/glossary/how-refund-offsets-work-and-when-to-challenge-them/
• How the Treasury Offset Program Can Affect Your Federal Refund: https://finhelp.io/glossary/how-the-treasury-offset-program-can-affect-your-federal-refund/
• How to Engage the Taxpayer Advocate Service: https://finhelp.io/glossary/how-to-engage-the-taxpayer-advocate-service-when-and-how-to-ask-for-help/

Authoritative sources

• Treasury Offset Program and information on offsetting federal payments: https://www.treasury.gov
• IRS information on offsets and injured-spouse allocation (Form 8379): https://www.irs.gov
• Consumer Financial Protection Bureau overview of federal debt collection tools: https://www.consumerfinance.gov

Professional insight and final tips

• Act immediately—most successful recoveries start within days of the notice. Keep digital and paper copies of every contact, payment, and document. If you’re unsure, consult a tax professional or an authorized representative; serious cases (identity theft, significant hardship, or complex joint-return issues) often benefit from representation.

Disclaimer

This article is educational only and does not constitute legal or tax advice. For guidance tailored to your situation, consult a qualified tax professional or attorney.