The Financial Management Service, a division of the U.S. Treasury Department, maintains a database of people who are delinquent on debts to the federal government. The service matches your Social Security number against the delinquent debt database; if you are in the database, the department authorizes the seizure of all or part of your refund.
If you are delinquent by more than 90 days on student loans, medical bills from the Veterans Administration or Housing and Urban Development debt, your name is placed in the FMS database. If you owe back taxes, the Internal Revenue Service will claim your refund even if you are making payments.
Your state can seize your refund if you owe state taxes or child or spousal support or if you must repay unemployment benefits. If your child's custodial family receives Temporary Assistance for Needy Families, the state can request a refund seizure if you are $150 behind in your payments; if the custodian doesn't receive TANF, you must be at least $500 in arrears, according to the U.S. Department of Health and Human Services. In some cases, the state can request a seizure even if your child is no longer a minor.
Contesting the Seizure
Before the IRS issues your refund, you will receive a notice from the FMS informing you of the intent to seize -- or offset -- your refund. The notice states how much the offset is and what agency is requesting it. You must contact the department or agency that seizes your refund if you wish to contest the seizure. You can contest any portion of the seizure up to the full amount. If you do not receive a notice, call FMS when you discover the offset.
If your spouse is not responsible for the debt and you file a joint return, your spouse can file Form 8379 to request her portion of the refund. If you know when you file your taxes that your refund is subject to seizure, send Form 8379 with your return and indicate on your return that you are attaching the form by writing "Injured Spouse" in the top left corner of your return. If you file electronically, it will take up to 11 weeks for the IRS to process your return. If you file a paper return, expect processing to take up to 14 weeks.
- Financial Management Service: Common Questions -- Treasury Offset Program (TOP)
- Internal Revenue Service: Refund Inquiries
- U.S. Department of Health and Human Services: Federal Tax Refund Offset Program
- Internal Revenue Service: Refund Offsets for Unpaid Child Support, and Certain Federal, State and Unemployment Compensation Debts
- all the various bills image by Bruce Shippee from Fotolia.com