Background and why this happens

The IRS and the Treasury Offset Program (TOP) can legally take — or “offset” — part or all of your current-year federal refund to pay prior-year federal or state debts. Common referred debts include unpaid federal taxes, delinquent federal student loans, and past-due child support. The IRS or the federal agency that referred the debt will send an offset notice explaining what was taken and why (IRS – Understanding Your IRS Refund; Treasury Financial Management Service — Treasury Offset Program).

How offsets typically work

  • The agency with the claim (for example, the Department of Education or a state child support agency) refers the unpaid debt to TOP. Treasury matches the debt against federal payments, including tax refunds.
  • If your refund is identified, Treasury applies the offset and sends an explanation. The IRS or the referring agency will mail a notice that lists the amount offset and the agency that received the funds.

What notices and tools to check first

  • Check your mailed notices. If your refund was offset you’ll usually get an IRS offset notice explaining the amount and the referring agency.
  • Review your IRS online account and use the Where’s My Refund? tool to confirm the refund status (irs.gov).

Immediate steps to take (practical checklist)

  1. Read the notice carefully. It identifies the type of debt, the offset amount, and the agency that requested it.
  2. Don’t ignore it. The notice will include contact information for the referring agency — that agency handles disputes about the underlying debt. For federal non-tax debts, contact the agency that referred the debt (not IRS) to request review or an appeal.
  3. If the offset was for a tax liability you don’t owe, contact the IRS Collections or Appeals number on the notice and gather documentation that proves the debt is paid or incorrectly assessed.
  4. If a spouse’s debt caused the offset and you believe only the other spouse is responsible, consider filing Form 8379 (Injured Spouse Allocation) to claim your share of the refund (IRS.gov—Form 8379).
  5. If you suspect identity theft or that someone filed a return using your Social Security number, contact the IRS Identity Protection unit immediately and visit the IRS identity theft resources.
  6. If you cannot resolve the issue with the referring agency or IRS, contact the Taxpayer Advocate Service — an independent organization inside the IRS that helps taxpayers when they face economic hardship or delayed resolution.

How to dispute or recover an incorrectly offset refund

  • For non-tax debts (e.g., student loans or child support): file an appeal or dispute with the agency that referred the debt to TOP. Each agency has its own review and collection rules; the offset notice lists how to challenge the debt.
  • For tax-related offsets: dispute with the IRS using the contact information on the notice and provide documentation. If you are still blocked, the Taxpayer Advocate Service can escalate the case.
  • For spouse-related offsets: submit Form 8379 to claim the injured spouse’s share. Filing Form 8379 can recover your portion of the refund that was wrongly taken for your spouse’s debt.

Steps to reduce the risk of future offsets

  • Set up a payment plan with the IRS (installment agreement) or with the referring federal agency to get the debt out of collections.
  • For defaulted federal student loans, explore rehabilitation, consolidation, or income-driven repayment options through the Department of Education.
  • Keep IRS notices and debt-payment records organized so you can respond quickly if a future offset occurs.

When to get professional help

In my practice, offsets most often create cash-flow stress for clients who expected a refund. If the offset amount is substantial, or the agency refuses to correct an error, consult a tax professional or tax attorney. If you’re at immediate financial risk, the Taxpayer Advocate Service is a free option for urgent assistance.

Related resources on FinHelp

Authoritative sources and further reading

Professional disclaimer

This article is educational and not personalized legal or tax advice. For guidance tailored to your circumstances, consult a qualified tax professional, attorney, or contact the IRS or the agency that referred the debt.