So, you’ve just filed your taxes, and you’re
excited to see that you have a refund headed your way. Only, that refund never
comes. You contact the IRS and learn that a tax offset is in place. If this
happens to you, you might be confused
about what has happened and why, but it’s actually pretty simple.
The
Treasury Offset Program
Tax offsets, as much as you may hate them, are
legal and are issued by the Treasury Offset Program. Through this program, the
IRS is able to seize a refund and use it to pay debts that the taxpayer has.
How does this happen? Well, the entity that
you owe money to reports it to the IRS after you’re 90 days past due. If the
debt is legitimate and one that is approved for collections by the program,
there’s not much that you can do. All or part of your refund can legally be
used to pay the debt instead of making its way into your pocket.
Approved
Debts
So, you may be wondering, what debts can lead
to a tax offset?
Thankfully, it’s not all or even most of them.
Your refund will only be offset if you owe for unemployment compensation
benefits, federal student loans, state tax, child support, or alimony.
If your debt doesn’t fall into one of these
categories, then you have nothing to worry about. Your refund will still make
its way to you.
A tax offset may seem like terrible news, but
look at it in this light: you’re paying a debt you owe, and you have one less
financial burden on your shoulders. In this way, it can actually be a good,
helpful thing, even if it doesn’t feel like it.
If you do fall victim to a tax offset, it may
also mean that you’re not taking care of your financial obligations as you
should. Take it as a sign that it’s time to step up and get some professional
financial help. This “bad luck” could actually be the impetus you need to
improve your financial future.