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Debts that can cause income tax refunds to be held back

Every year, taxpayers in Georgia and around the country who were expecting to receive federal income tax refunds are sent what are known as offset notices instead. The Bureau of Fiscal Service, which is part of the U.S. Department of the Treasury, sends these notices out when refunds are being withheld because taxpayers owe certain types of debt. The agency can also garnish Social Security and Social Security Disability Insurance benefits in similar situations.

The BFS may send offset notices when taxpayers have unpaid federal or state taxes, are delinquent on their court-ordered child or spousal support payments or have defaulted on a federally insured student loan. Income tax refunds may also be withheld when state authorities believe that taxpayers received more unemployment compensation that they were entitled to. This can be because they committed fraud or failed to properly report all of their income.

Offset notices contain information about the debts in question and inform taxpayers about how they can be contested. When taxpayers who filed joint income tax returns are sent offset notices, their spouses can petition the Internal Revenue Service to receive their share of any claimed refunds provided that they are in no way obligated to pay the debts in question.

In addition to holding back refunds, the IRS can garnish paychecks and seize assets when taxpayers are thought to owe unpaid taxes. Facing the power of a federal agency can be daunting for those who generally try to keep their financial affairs in order, but attorneys with experience in this area may be able to deal with the IRS on their behalf. Attorneys may work to prevent bank accounts from being garnished and assets seized, and they could also encourage the IRS to consider an offer in compromise agreement to settle outstanding tax debts.

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