Who Can Lien Your Income Taxes?
Many taxpayers file their tax returns expecting a tax refund and find the refund is reduced or withheld. Congress has authorized the Federal Management Service, which issues Internal Revenue Service refund checks, to "offset" payments for specific reasons, such as unpaid child support. If your refund is reduced or withheld, you will receive a Notice of Offset from the Federal Management Service.
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Reasons for Offset
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Congress has specifically authorized the Federal Management Service to reduce or withhold federal tax refunds for four reasons: unpaid child support; non-tax debt owed to a federal agency (defaulted student loans is an example); unpaid state income taxes; and certain unemployment compensation debts owed to a state. If a state or federal agency is trying to collect any of these types of debt from you, the agency can submit the debt to the Federal Management Service for collection. The Federal Management Service must reduce or withhold your refund and pay the agency collecting the debt.
Contact the Agency Collecting the Debt
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If you think there is an agency that might try to collect a debt by offsetting your tax refund, contact the agency to determine if the debt has been submitted to the Financial Management Service. If the debt has already been submitted, your refund will be offset. You can avoid a tax refund offset by negotiating with the agency to establish a payment plan or agreeing to other conditions.
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Notice of Offset
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When the Federal Management Service offsets your tax refund, you will be sent a Notice of Offset. The notice will detail the amount withheld, the agency collecting the debt, along with the agency's address and telephone number. If you want to contest the collection, you must contact the collecting agency. If your refund is offset, neither the IRS nor the Federal Management Service can help you. You must contact the collecting federal or state agency.
Injured Spouse, IRS Form 8379
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Most married taxpayers file their federal return using the Married Filing Jointly status, which typically maximizes tax benefits and credits. If your spouse owes debt that would be collected through a tax refund offset by the Federal Management Service, you can protect your share of the refund by filing IRS Form 8379, Injured Spouse. The spouse who does not owe the debt is "injured" when his share of the refund is taken to pay the debt. Form 8379 apportions income, deductions, credits and refund between each spouse. This will allow the Federal Management Service to take only the portion of the refund that would be due to the spouse who owes the debt.
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References
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