Why the IRS takes money from your refund
The IRS can take part or all of your federal tax refund to pay debts you owe to the federal government or to states. This process is called offset, and it happens automatically before the refund reaches you. The IRS does not need your permission and does not have to notify you in advance—though you will receive a notice after the offset occurs.
The most common reasons for offset are unpaid federal income taxes from prior years, unpaid student loans in default, child support arrears, and state income tax debt. The IRS also offsets refunds for certain other federal debts, including overpayments of unemployment benefits and amounts owed to federal agencies.
If you owe money to a state (not the federal government), that state can also request that the IRS intercept your federal refund and send it to them. This is called state offset or federal tax offset, and it works the same way—your refund is reduced or eliminated before it reaches your bank account.
Key Takeaways
- The IRS offsets refunds for federal debts like back taxes, defaulted student loans, and child support without notifying you beforehand.
- You can check whether an offset is pending by calling the IRS at 800-829-1040 or using the IRS's online account tool at irs.gov.
- If you dispute the debt or believe the offset is wrong, you must file a protest with the IRS within 60 days of receiving the offset notice.
- Paying down or resolving the underlying debt before you file your tax return is the most direct way to prevent an offset.
- If you need the refund urgently, you may be able to request a Currently Not Collectible status or an Offer in Compromise to stop or reduce the offset.
Check whether your refund will be offset before filing
The IRS does not tell you in advance that an offset is coming, but you can find out yourself by contacting the IRS directly or checking your online account. Call the IRS at 800-829-1040 (Monday through Friday, 7 a.m. to 7 p.m. your local time) and ask whether you have any federal tax debt or whether your refund is flagged for offset. Have your Social Security number and a copy of last year's tax return ready.
You can also check your account online at irs.gov by signing in with your IRS username or creating one. Under "Account" or "Tax Records," you can see whether you owe back taxes or have any collection actions pending. This tool does not always show state offsets, so if you owe money to a state, contact that state's tax agency directly.
If you discover an offset is pending and you believe it is wrong—for example, you already paid the debt or the amount is incorrect—contact the IRS immediately. The offset will still happen unless you file a formal protest, which must be received within 60 days of the offset notice.
Dispute the offset if you believe it is incorrect
If the IRS offsets your refund and you think the debt is not yours, was already paid, or the amount is wrong, you have the right to protest. You must file your protest in writing within 60 days of receiving the offset notice (the notice will show the date the offset occurred). Mail your protest to the address shown on the notice.
In your protest letter, state clearly why you believe the offset is wrong. Include copies of any proof—cancelled checks, payment receipts, proof of identity theft, or documentation that the debt belongs to someone else. Keep a copy for your records and send the letter by certified mail so you have proof of delivery.
The IRS will review your protest and send you a written response. This process can take several months. While your protest is pending, the offset stands—the money is not returned to you until the IRS agrees the offset was wrong.
Request Currently Not Collectible status to pause collection
If you owe back taxes and are in financial hardship, you can request Currently Not Collectible (CNC) status. This tells the IRS to pause collection efforts, including offsets, while you recover financially. CNC does not erase the debt, but it stops the IRS from taking your refund, garnishing your wages, or levying your bank account.
To request CNC status, call the IRS at 800-829-1040 and explain your situation, or file Form 433-F (Collection Information Statement) by mail. The IRS will ask about your income, expenses, and assets to determine whether you truly cannot pay. If approved, your CNC status typically lasts one year, after which the IRS will review your situation again.
CNC status does not stop interest and penalties from accruing on the debt. Once your financial situation improves, the IRS will resume collection efforts and may offset future refunds. However, CNC can buy you time if you need your current refund to cover essential expenses.
Offer an Offer in Compromise to settle for less
An Offer in Compromise (OIC) is a formal agreement to settle your tax debt for less than the full amount owed. If the IRS accepts your offer, they will stop offsetting your refunds and will not pursue further collection. You must prove that paying the full amount would create financial hardship or that there is doubt about whether you actually owe the full amount.
To submit an OIC, file Form 656 (Offer in Compromise) with the IRS. You will also need to complete Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) or Form 433-B (Collection Information Statement for Businesses) to show your financial situation. The IRS charges a non-refundable application fee, though the fee may be waived if your income is below a certain threshold.
The IRS typically takes four to six months to review an OIC. While your offer is pending, the IRS usually does not offset your refund, though this is not may provide. If your offer is rejected, you can appeal or resubmit with new information about your finances.
Pay or resolve the underlying debt before filing
The most straightforward way to prevent an offset is to resolve the debt before you file your tax return. If you owe back taxes, contact the IRS and set up a payment plan (called an Installment Agreement). You can set up a plan online at irs.gov, by phone at 800-829-1040, or by mail. Monthly payments are typically as low as $25, depending on the amount owed.
If you owe child support, contact your state's child support enforcement agency and ask about payment options or a modification of your support order. If you owe on a defaulted student loan, contact the loan servicer about rehabilitation or consolidation, which can bring the loan out of default and stop the offset.
If you owe a state income tax debt, contact that state's tax agency directly. Many states offer payment plans similar to the IRS. Resolving the debt before you file means your refund will not be offset, and you will receive the full amount.
Understand what happens after the offset
When the IRS offsets your refund, you will receive a notice in the mail within two to three weeks of the offset date. The notice will show the amount offset, the reason for the offset, and the agency that received the money. Keep this notice—you will need it if you want to dispute the offset or file a claim for refund.
If multiple debts are offset from your refund, the IRS applies the money in this order: federal taxes first, then federal non-tax debts (like student loans), then state income taxes, then state non-tax debts (like child support). If your refund is smaller than the total debt, some creditors may not receive payment.
After an offset, the debt does not disappear. You still owe the money, and the IRS or other creditor can continue collection efforts—wage garnishment, bank levies, or liens on your property. Resolving the underlying debt remains your responsibility.
Frequently Asked Questions
Can the IRS offset my refund without telling me first?
Yes. The IRS does not notify you before offsetting your refund. You will only learn about it when you receive the offset notice in the mail after the money has already been taken. This is why checking your account or calling the IRS before filing can help you prepare.
What if my spouse owes money but I don't—will my refund be offset?
If you file jointly and your spouse owes a federal debt, the IRS can offset the entire refund, even the portion that is yours. You can file Form 8379 (Injured Spouse Claim) to request that your share of the refund be returned to you. You must file this form with your tax return or within three years of the filing date.
How long does it take to get my refund back after I pay off the debt?
Once you resolve the debt, future refunds will not be offset. However, a refund that has already been offset will not be returned to you unless you file a successful protest or claim. If the offset was wrong, the IRS may refund the money, but this can take several months.
Can I stop an offset by filing my taxes late?
No. The IRS will offset your refund regardless of when you file. Filing late does not prevent offset and may result in additional penalties and interest on any tax debt you owe.
What if the debt is from identity theft?
If someone else incurred the tax debt using your identity, file a protest with the IRS and include a copy of your identity theft report (Form 14039 or a police report). Contact the IRS Criminal Investigation division at 800-829-0433 to report the fraud. The IRS may reverse the offset if they determine the debt is not yours.