Notice of Intent to Offset

The IRS can seize your tax refund or other federal payments when you owe federal back taxes.  The IRS manages offsets for Federal taxes owed. The Department of Treasury’s Bureau of Fiscal Service (BFS) conducts the Treasury Offset Program (TOP) and issues IRS tax refunds. BFS handles all other offsets. Therefore, through TOP, BFS may reduce your federal tax refund for other liabilities.

What Is a Notice of Intent to Offset

What Is a Notice of Intent to Offset?

The “Notice of Intent to Offset” is telling you that you have taxes owed and the government is going to seize part or all of your federal payments. The IRS commonly offsets Federal tax refunds, but they can also take other types of federal payments as well.

Read this notice carefully to make sure the information is correct. It should contain the following information:

1. The taxpayer’s name
2. The original amount of your federal payment
3. The amount you’ll receive after the offset
4. The agency that is taking your money
5. The agency contact information and how to dispute the amount

The BFS (Treasury’s Bureau of Fiscal Service) may offset your entire tax refund if you owe more than the amount of the tax refund. If you don’t resolve your tax problems, the IRS can offset future tax refunds as well.

How the Treasury Offset Program Works

The Bureau of the Fiscal Service (BFS) operates the TOP. When you receive a payment from a federal agency—such as a federal tax refund—it is processed by the BFS.

The BFS also receives information about your delinquent liabilites from creditor agencies, such as the Department of Education. The BFS must make sure of the following before any offset to payments take place:

1. The tax identification number and name for the federal payment match the information for the delinquent borrower
2. The federal payment is a type of payment that qualifies for the TOP

Your data can generally be sent to TOP once your liability is more than 90 days past due. The agency you owe money to must send you notices and give you a chance to dispute the amount owed.

Types of Federal Payments That Can Be Reduced by the Offset Program

Federal tax refunds are the payment most commonly offset. However, the offset program can apply to any of the following payments:

1. Federal wages, including military pay
2. Federal retirement payments, including military retirement pay
3. Payments made to you as a contractor or vendor doing business with the government
4. Federal employee travel advances and reimbursement
5. Some federal benefit payments, such as Social Security Benefits (other than Supplemental Security Income)
6. A state income tax refund

Additionally, if you received a tax refund erroneously and you don't repay it, the IRS may assess that amount against you and then seize your tax refund to cover the unpaid erroneous refund. 

While the IRS can offset some federal payments, federal laws limit withholding amounts for different types of payments. For example, the federal government may take your entire tax refund but generally can only take 15% of your Social Security benefits payments.

Types of Liabilities That Can Be Subject to Offset

Your federal payments can be offset when you have any of the following types of delinquent liabilities:

1. Federal taxes owed
2. State income taxes owed
3. Past due federal student loans
4. Federal agency non-taxes owed
5. Unpaid child support or spousal support obligations
6. Certain unemployment compensation liabilities you owe to a state

If you want to pay off liability or dispute the amount owed, you’ll need to contact the federal or state agency listed in the offset notice.

What to Do If You Receive a Notice of Intent to Offset Your Tax Refund

First, review the information in the offset notice to confirm that it’s correct. If you don’t dispute the amount owed and don’t want to try to prevent the offset, you don’t need to do anything. If you’re going to challenge the offset, there are a few different options available to you, depending on your circumstances.

If You Dispute the Amount Owed

Contact the agency listed in the offset notice to dispute the amount you owe. You may have a limited time to dispute the amount before the offset takes place.

If you have paid off your liability or you don’t owe the liability, the agency that’s collecting the liability is responsible for informing BFS to stop the offset or to refund amounts improperly offset. Don’t contact the IRS directly—they are not in charge of the TOP. Therefore, if the liability doesn’t pertain to money owed to the IRS, the IRS cannot help you.  You should call the IRS only if the BFS letter states an amount different than from the refund amount shown on your tax return.

If You Filed a Joint Return and Your Spouse’s Separate Liability Caused the Offset

You can claim an injured spouse allocation to receive your share of the joint tax refund. Use Form 8379 to file an injured spouse allocation.

You can file Form 8379 along with your tax return or submit it after the IRS process your tax return. Expect your tax return to take longer to process—up to 14 weeks—when you claim an injured spouse allocation.

You can also use the Married Filing Separately filing status to avoid a refund offset for your spouse’s liability, but first, ask a tax professional about the pros and cons of this approach.

If the Offset Applies to Federal Student Loans

You can dispute the offset within 65 days of receiving the Notice of Intent to Offset. If you are making your required payments or have paid your full balance, you may be able to avoid the offset.

Follow the instructions on your offset notice to request a review before the offset occurs.

How to Avoid IRS Offsets

Once you receive an offset notice, you’ll generally need to pay your full balance due within 60 days to prevent the offset. If you’ve filed for bankruptcy before the offset, you may be able to avoid the offset due to the automatic stay on collections during bankruptcy.

You may be able to avoid an offset by making payments or attempting to settle your delinquent liability. However, this doesn’t guarantee that the government won’t offset federal payments. The IRS generally continues to offset your tax refunds while you are making monthly payments using an IRS installment agreement.

You can adjust your tax withholding or estimated tax payments to reduce the amount you’ll receive in your tax refund check, which lowers the amount available for offset. But don’t minimize withholding too much or you may have to pay underpayment penalties.

If you are looking for IRS tax help, start with a search below to get help resolving your taxes owed and avoiding IRS offsets.