Will the IRS Withhold My Refund for Delinquent State Taxes?
If you are delinquent in paying your federal tax, then the chances are good that your state's department of revenue is aware of your federal debt, and if you owe the state, the Internal Revenue Service is probably aware of your state debt as well. This is simply because technological advancements have afforded government agencies the ability to connect and share data. One of the main benefits to data sharing is that agencies can work as a tax collector on behalf of each another. Hence, the IRS can offset your federal refund to pay your delinquent state tax and vice versa.
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Process
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If your refund is set to be offset to pay your delinquent state taxes, FMS will send you a notice advising you of the offset amount along with the phone number of the state tax office requesting the funds. FMS will take as much of your refund as is necessary to pay the entire state tax debt and then refund the remainder to you. If your refund is not enough to pay your state taxes in full, the IRS will take your entire refund and you will not receive anything. Generally, the IRS will continue to offset your refund until the delinquent state debt is paid in full.
Assistance
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Contact your state tax agency if you have questions about your debt or believe the amount is incorrect. Keep in mind that FMS is only responsible for intercepting your refund and transferring it to the state agency that is requesting it. FMS is not responsible for validating the debt's accuracy. If you have other questions for FMS, you can contact the agency Monday through Friday between the hours of 7:30 a.m. and 5:00 p.m. at 800-304-3107.
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Problem Resolution
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If your refund was partially offset for delinquent state taxes but you did not receive the remainder of the overpayment, the IRS advises that you allow an additional five days from the refund issue date for direct deposits and 14 days for paper checks. If after the allotted period the refund is still not received, you should complete IRS Form 3911 and mail it to the IRS so that it can initiate a trace of your refund.
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