Tax Insights

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Six facts on tax refunds and offsets

So, you have filed your income tax return. And you are expecting a big refund. But instead of that amount you were expecting, a lesser amount was direct deposited into your account, or arrived in the mail.

Certain financial debts from your past may affect your current federal tax refund. The law allows the use of your federal tax refund to pay debts owed to other federal and state agencies.

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Here are six facts from the IRS that you should know about tax refund ‘offsets.’

1. A tax refund offset generally means the U.S. Treasury has reduced your federal tax refund to pay for certain unpaid debts.
2. The Treasury Department’s Bureau of the Fiscal Service (BFS) issues tax refunds and conducts the Treasury Offset Program.
3. If you have unpaid debts, such as overdue child support, state income tax or delinquent student loans, BFS may apply part or all of your tax refund to pay that debt.
4. You will receive a notice from BFS if an offset occurs. The notice will include the original tax refund amount and your offset amount. It will also include the agency receiving the offset payment and that agency’s contact information.
5. If you believe you do not owe the debt or want to dispute the amount taken from your refund, you should contact the agency that received the offset amount, not the IRS or BFS.

If you filed a joint tax return, you may be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund, file Form 8379, Injured Spouse Allocation.

Be sure to contact your Henry+Horne advisor with any questions.