4 Reasons the IRS Can Seize Your Tax Refund

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The information in this article is up to date for tax year 2023 (returns filed in 2024).

Finding out you have a tax refund heading your way can be extremely exciting.  This is your chance to finally catch up on bills, buy that item that’s been on your wish list or take a much-needed vacation.  But what happens when you check the “Where’s My Refund?” tool and realize the IRS swooped in and took it?  That’s right, Uncle Sam has the authority to seize your refund under certain circumstances.  Here are four situations when the IRS can come between you and your money.

You have an unpaid tax debt

Let’s be realistic here, you can’t possibly expect to get a tax refund if you have an unpaid tax debt.  Uncle Sam isn’t that generous, and neither is your State.  They’re going to take whatever money you had coming your way and apply it to your debt.  If there’s anything leftover (fingers crossed) it will be distributed to you.  The best way to avoid your tax refund from being offset or reduced is to pay your past-due debt. Need to learn how to make an IRS payment? Check out “7 Ways to Pay Your Tax Bill” which walks you through all of your payment options, so you can make the best decision for your situation.

You’ve defaulted on your student loan

You can run but you can’t hide from your student loans.  One way or another your lender is going to get their money.  If you default on a federal student loan, the IRS can seize your tax refund to pay a portion of your debt.  The good news is you won’t be blindsided.  The IRS is required to give you advance notice and the opportunity to respond to the claim.  This is typically done by sending a notice in the mail.

Your child support payments are past due

When you have children, both parents are responsible for the cost of raising them.  If you’re ordered to pay child support, you must fulfill your obligation.  Unfortunately, not everyone holds up their end up of the deal.  Therefore, the Federal Tax Refund Offset Program must step in and help collect the past due payments.  If the custodial parent receives benefits from the Temporary Assistance for Needy Families (TANF) program and you owe more than $150, your tax refund may be intercepted.  For a non-TANF case, the IRS will seize your refund if at least $500 is past due.

You have unemployment compensation debt

Unemployment compensation is supposed to help jobless workers stay afloat while they look for something new.  But some people try to abuse the system. If you receive more unemployment compensation than you’re entitled to, you better believe that you will be paying it back.

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The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.