What can you do if the IRS offsets your refund?

If the IRS takes (or “offsets”) part or all of your tax refund, the money is usually applied to an outstanding obligation through the federal Treasury Offset Program (TOP). Offsets are commonly used to collect unpaid federal or state taxes, past-due child support, and defaulted federal student loans. While the loss of an expected refund can be stressful, there are clear, practical steps you can take to verify the offset, pursue recovery if it was made in error, and manage or resolve the underlying debt.

How the offset process works (in plain terms)

  • When your return is processed, the IRS — or Treasury’s systems — cross-check tax refunds against federal and certain state delinquent debt records. (See the Treasury Bureau of the Fiscal Service TOP website for program details: https://fiscal.treasury.gov/top/.)
  • If a match is found, the refund is reduced or withheld and the funds are sent to the agency that reported the debt.
  • You should receive a written notice explaining the offset, the amount taken, and the agency that received the funds. The notice is usually your first formal explanation of what happened.

(Authoritative sources: Treasury TOP and IRS resources on offsets and refunds. For general guidance see Treasury TOP: https://fiscal.treasury.gov/top/ and the IRS Get Transcript and refund information pages: https://www.irs.gov/individuals/get-transcript and https://www.irs.gov/refunds.)

Step-by-step recovery checklist

  1. Read the notice carefully
  • The notice you receive after an offset will name the agency that requested the offset, the amount taken, and contact information for the agency or Treasury. Save that notice; it’s the starting point for any dispute or review.
  1. Verify the offset online or by phone
  1. Identify who to contact
  • If the offset was for child support, contact your state child support enforcement agency.
  • If it was for federal student loans in default, contact the U.S. Department of Education or the loan servicer identified on the notice.
  • If the offset applied to unpaid federal taxes, contact the IRS to discuss the tax balance and collection alternatives.

The notice will usually list the name of the agency that received the funds — contact that agency first to learn why they certified the debt.

  1. Gather documentation
  • Collect proof that the debt is incorrect or already paid: canceled checks, bank statements, payment receipts, loan payoff letters, or court documents for child support.
  • If the offset is based on identity or administrative error (for example, you are not the person named), get documents proving your identity and residency during the tax year.
  1. Request a review or dispute the offset
  • Many agencies have an internal review or dispute process. Ask the certifying agency (the one listed on the notice) how to file an administrative review or submit supporting evidence.
  • For offsets handled through TOP, Treasury and the certifying agency coordinate the return if an error is found (https://fiscal.treasury.gov/top/).
  1. Consider contacting the IRS if it’s a tax-related offset
  • If the offset was to satisfy an outstanding federal tax debt, you can explore an installment agreement, an offer in compromise (if eligible), or other IRS collection alternatives. A tax professional can help evaluate which option fits your situation.
  1. If you believe the offset was an identity theft or identity-matching error
  • Report suspected identity theft to the IRS at Identity Theft Central (https://www.irs.gov/identity-theft-central) and to the certifying agency. You’ll need to provide documentation and follow the agency’s instructions for identity-theft victims.

Options when the offset was an error

  • Administrative review: Request a review from the agency that certified the debt. If the agency agrees the offset was incorrect, it will request Treasury to return the funds.
  • Reconciliation with the creditor: If payments were misapplied, present proof and request that the creditor re-credit your account and seek return of the offset.
  • Tax refund reconsideration: In some cases involving IRS processing errors, taxpayers may request a refund reconsideration. For process and forms, see IRS guidance and consider professional tax help.

For step-by-step instructions specific to refund disputes at FinHelp, see our related posts:

When you won’t get your refund back

  • If the offset cleared a legitimate debt — for example, an accurate court-ordered child support arrearage or an unpaid federal tax bill — you generally will not get that portion of the refund back. Instead, focus on resolving the underlying balance, or negotiating payment terms to avoid future offsets.

Practical steps to limit future offsets

  • Stay current on court-ordered child support and federal loan payments.
  • Pay or make arrangements for delinquent federal or state tax balances; the IRS will often accept installment agreements if you qualify.
  • Monitor your credit and debt notices so you see collection activity before a refund is issued.

Common scenarios and what I advise clients

  • Child support offsets: State child support agencies regularly use TOP. If you’re surprised by an offset, I advise contacting the state agency immediately and asking for an account history and any arrears calculation. Mistakes happen when obligations or custodial arrangements change.

  • Student loan offsets: For clients with defaulted federal loans, I typically recommend calling the loan servicer or the Department of Education to confirm default status and explore rehabilitation or consolidation options that can stop future offsets.

  • Erroneous offsets (identity or administrative errors): Document everything and file the requested proof quickly. Errors can often be reversed if you provide clear documentation showing the offset was applied to the wrong person or debt.

What to expect timing-wise

  • Response times vary by certifying agency and by Treasury. Some agencies respond within weeks; others may take significantly longer. Keep copies of your correspondence and follow up regularly.

Helpful resources and authoritative guidance

Mistakes to avoid

  • Don’t ignore the offset notice. It includes the most important information for next steps.
  • Don’t assume the IRS will automatically return money if you later pay the debt — follow the formal review/dispute process.
  • Don’t rely on generic online advice; debt and tax collection rules vary by creditor and by state.

Final practical tips from a tax-practice perspective

  • Keep good records. Payment receipts and correspondence speed up disputes.
  • If you can’t resolve the issue with the certifying agency, consider a tax pro, consumer law attorney, or contacting your state attorney general’s consumer protection division.
  • If your case involves identity theft, prioritize identity-theft reporting with the IRS and the creditor agency to expedite review.

Disclaimer: This article is educational and not a substitute for personalized tax, legal, or financial advice. Your situation may require tailored help from a CPA, tax attorney, or the agency that issued the offset notice.