When Can the Government Take Your Tax Refund?

March 16, 2012 | By: TaxCure Staff

Can the Government Take Your Tax RefundSo, you’ve got a tax refund coming. At least you think you do. If you owe money to the federal government, though, that tax refund might never make it to your bank account. Indeed, the government might decide to seize it in order to offset what you owe. Often, you won’t know that your tax refund isn’t coming until you receive a notice of seizure. This letter comes in the mail, instead of your tax refund, and informs you that your tax refund has been taken by the IRS to pay a tax balance that you owe to the government.

Before you begin counting on receiving a big refund check, make sure that you truly have that money coming. Here are some times when the federal government can collect your tax refund:

Back Taxes

If you owe back taxes, the IRS can take your current tax refund to offset what you owe. Until you clear up the matter, your tax refund is subject to seizure. The IRS does allow payment plans and settlements. If you have past-due tax balances, you can seek professional help.

Unpaid Child Support

Even though this is money you owe for the support of your children, and not directly to the government, it can still be cause for the government to claim your tax refund. Child support is collected by a federal agency, and if you are behind, the IRS is notified. The IRS can take your refund and then send it along to where it was supposed to be paid.

In order to stop this seizure of your tax refund, it’s important that you pay the child support you owe as required by the court. If you can’t afford to pay the child support, you need to go through the proper legal channels and apply to have the amount you pay changed.

Student Loans

It’s a serious thing to default on your student loans. You will be ineligible for certain federal programs, and your tax refund might be forfeit. When your loans are default, the IRS can take your refund and apply it toward your student loan. In fact, the IRS can keep taking subsequent refunds until your debt is discharged.

If you want to keep your tax refund next year, you need to contact the lender. Usually, you can work out a new payment plan that reclassifies your student loans so that they are no longer listed as being in default.

Bottom Line

There are other federal liabilities that you might owe as well. Anytime you owe money to the federal government – and you haven’t been making regular payments – the IRS can take your tax refund. The IRS doesn’t need to provide you with prior notice, either. The government has a legal right to that money and can take it. If you want to make sure you get the refund you are entitled to, you need to make sure you are up to date in paying what you owe to the government.