Being a former IRS agent I get calls from clients all the time telling me that their refund check has been seized.


Most people have no idea the different methods that IRS uses to keep your refund.

Please read the following list and be aware that IRS has six different options to keep or see your refund check from you.


1. Federal Income Taxes

If you owe back income taxes, your refund can be taken to pay them. Whatever is left, if anything, will be refunded to you in the way you requested on your tax return, either by direct deposit or check. You should also get a notice from the IRS explaining why the money was withheld. If you believe that a mistake was made, you will need to contact the IRS.


2. State Income Taxes

The IRS can also withhold money from your tax refund to cover unpaid state income taxes. the federal government has agreements with the different state governments where they go ahead and exchange information to help collect money that’s due and owing.


3. State Unemployment Compensation.

If your state believes you collected more in unemployment compensation than you were entitled to, either due to outright fraud or to a failure to properly report your earnings, it can also ask the U.S. Treasury to offset your tax refund.


4. Student Loans  (this is the new BIGGIE!!!!!!)

If you defaulted on a federally insured student loan, the government can seize your tax refund to help repay it.

The Treasury Department/IRS is required to send you advance notice and to provide an opportunity for you to challenge the claim or pay it off before your refund is withheld.

Your state could also withhold money from your state tax refund for this purpose.

In addition, the U.S. Department of Education, or the guaranty agency that holds your loan, has the authority to order your employer to withhold up to 15% of your disposable income until the defaulted loan is paid off. You can learn more about dealing with defaulted student debt here.


5. Child Support (this has nailed many a foe)

When parents are delinquent in paying court-ordered child support, their state’s child-support agency can request that the Treasury Department withhold money from their tax refund to cover the back payments. People in this situation should receive a pre-offset notice explaining how much they owe, how the offset process works, and how to contest the debt. Once the money has been withheld from their refund, they should also receive an offset notice from the Bureau of the Fiscal Service showing how much money it withheld and referring them back to the state child support agency if they have further questions.


6. Spousal Support  (Boom)

Similarly, an award for spousal support that’s part of a child support order can also result in a tax-refund offset if those payments are overdue.

Note that if you filed a joint tax return with your spouse and your refund was offset because of debts belonging only to your spouse, you can request your portion of the refund back from the IRS. The claim form is called Injured Spouse Allocation (IRS Form 8379) and can be found online.

Bear in mind also that your tax refund is not the only leverage the Treasury can use to collect on back debts. Your Social Security or Social Security Disability Insurance (SSDI) benefits can be garnished (that is, partially withheld) in some instances.

However, supplemental security income cannot be garnished, even by the government.

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Mr. Michael D. Sullivan

Michael D. Sullivan is the founder of MD Sullivan Tax Group. He had a distinguished career with the Internal Revenue Service for 10 years. As a veteran IRS Revenue Officer / Agent, he served as an Offer in Compromise Tax Specialist and Large Dollar Case Specialist.

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