Overview

If you’re due a federal tax refund but also owe delinquent federal debts, Treasury’s Offset Program (TOP) or a collecting agency can take part or all of your refund to repay those debts. The Bureau of the Fiscal Service administers TOP; federal agencies submit debts they are authorized to collect and the system takes eligible federal payments—tax refunds included—to satisfy them (Bureau of the Fiscal Service).

How the process works

  • Agencies submit past‑due debts to Treasury’s Offset Program. Typical debts include defaulted federal student loans, past‑due federal taxes, and child support enforced through state agencies.
  • When the IRS issues a refund, Treasury checks TOP and, if there are qualifying debts, reduces the refund by the owed amount. You’ll receive a notice explaining the offset and which agency received the funds (IRS; Bureau of the Fiscal Service).
  • If multiple federal debts exist, offsets are applied according to agency claims and program rules; the offset notice will identify the creditor agency.

Who is affected

  • Individual taxpayers expecting a federal refund who also have delinquent federal obligations.
  • People with federal student loan defaults, unpaid federal tax balances, or court‑ordered child support past due.

What notices and records to expect

  • You should get an offset notice from the Bureau of the Fiscal Service telling you which payment was reduced and which agency received the money. The IRS will also reflect a smaller refund on your account and send communication if the offset was for a federal tax debt (IRS).

Practical steps to check and respond

  1. Verify the offset: Check the IRS “Where’s My Refund?” tool and look for messages on your IRS account. Also watch for the Treasury offset notice in the mail. (IRS.gov)
  2. Identify the creditor agency: The offset notice names the agency that asked for the debt collection (for example, the Department of Education for student loans or your state child‑support agency).
  3. Contact the collecting agency: If the debt is valid but you need a payment plan or a dispute, contact that agency directly for options (rehabilitation or consolidation for defaulted federal student loans; state child‑support offices for suspensions or disputes).
  4. Dispute wrong or identity‑theft offsets: If you believe the offset is incorrect (wrong identity, inaccurate debt, or belongs to someone else), follow the collecting agency’s appeal process and keep records. For TOP errors, the Bureau of the Fiscal Service and the agency that submitted the debt are your starting points.
  5. Injured spouse relief for joint returns: If your joint return was offset for your spouse’s separate debt, file IRS Form 8379 (Injured Spouse Allocation) to request your share of the refund be returned (IRS.gov).

Common mistakes and misconceptions

  • Assuming refunds are always protected: Tax refunds can be used to satisfy many kinds of federal delinquent obligations.
  • Ignoring mailed notices: Agencies must send notices—ignoring them makes disputes harder and can delay relief.
  • Failing to pursue injured‑spouse claims on joint returns: You can claim your portion of a joint refund using Form 8379 if your spouse’s debt caused the offset.

When you can appeal or get help

  • Dispute the underlying debt with the agency that submitted it. Each agency has its appeal process and timelines.
  • For offsets you believe resulted from identity theft or administrative error, compile documentation and contact the agency plus the Bureau of the Fiscal Service immediately.

Helpful resources and internal guides

Authoritative sources

Professional note and disclaimer

In my practice advising taxpayers, offsets are a common surprise at refund time. Early review of outstanding federal obligations and prompt response to agency notices usually avoids months of confusion. This article is for educational purposes only and does not replace personalized tax or legal advice—contact a qualified tax professional or the collecting agency for help with your specific situation.