Can the Government Take Your Tax Refund? How to Protect Your Money
The IRS can seize your tax refunds if you owe money to the government or delinquent child support.
This post explains everything you need to know including how to avoid tax refund seizure. To get help with your tax problems, use TaxCure to find a tax professional to help you today.
Key takeaways
- IRS tax refund seizure – The IRS can seize tax refunds for back taxes, defaulted student loans, money owed to the state, or delinquent child support.
- State tax refund seizure – Your state can seize your tax refund if you owe child support, federal taxes, or state debts.
- Hardship – If you're experiencing financial hardship, you can ask the IRS to release part of the refund, but only for IRS tax debt.
- Errors – Contact the state agency if your IRS tax refund was seized in error.
- Spouse's debts – You may be able to get refunds back if they're seized for your spouse's tax debt.
When can the IRS seize your tax refund?
The Treasury Department can seize your federal tax refund if you owe money to the federal or state government or if you have unpaid child support. Here's a breakdown of what to expect based on the type of debt you have.
Unpaid federal taxes
If you owe back taxes, the IRS will seize your tax refund. Even if you set up a monthly payment plan, the agency will still seize your payment and apply it to your tax due. Additionally, if you haven't filed a return for a previous year, the agency may hold your refund – in case you owe for the previous year.
For more details, check out this resource about what happens to your refund when you owe back taxes.
Delinquent federal student loans
The government can also seize your tax refund if you default on federal student loans – these refund offsets were paused during COVID but resumed in the fall of 2024. Note that you won't lose your refund if you owe student loans and are making satisfactory payments. Your refund is only at risk if you default on your payments.
Unpaid child support
If you are behind on child support payments, the government will also seize your tax refund. The Office of Child Support Services (OCSS) gets information from state child support agencies about delinquent child support, and the IRS can seize some or all of the tax refund, up to the amount owed. However, the reports aren't always updated in real-time, and due to that, the government may seize more than you owe.
Unpaid unemployment compensation or tax debt
The Treasury can also seize your tax refund if you owe money to your state unemployment insurance fund. This may apply in the following situations:
- You failed to report income when receiving unemployment payments, and the state overpaid you.
- You committed another type of fraud that led to an overpayment of state unemployment benefits.
- You're an employer who has unpaid unemployment insurance debt for over a year – for example, you failed to make quarterly unemployment payments on behalf of your employees.
Debt from Supplemental Nutrition Assistance Program (SNAP)
If you received an overpayment from the food stamps program (aka SNAP), the government can also seize your tax refund. By the time you lose our refund, you should have received several notices from the state alerting you about the amount owed.
Unfiled Tax Returns
The IRS can't size your tax return for unfiled taxes — but the agency can delay your refund. This means that they hold onto your refund until you file the unfiled returns from previous tax years or let them know why you didn't need to file. If you file your returns, the agency will then seize the tax refund to cover any tax debt you've incurred. If you file a return with no balance due or with you show that you didn't need to file, the agency will send out your refund at that point. If the IRS is holding your refund, they'll send you CP63.
When can the state seize your refund?
State revenue departments have the right to seize state tax refunds for state debts as well as federal debts. Through the State Reciprocal Program (SRP), states may seize refunds for all of the debts listed above (federal and state taxes, unemployment overpayments and tax debt, SNAP overpayments, and unpaid child support). Additionally, many states can seize your tax refunds for other state debts such as traffic tickets or court fines.
What if you owe money to both the state and the IRS?
Both the state and the IRS seize funds for their own debts first. For instance, if you owe $5000 to the IRS and $3000 to the state, but you file a federal tax return showing a refund of $6000. The IRS will seize $5000 to cover the money owed to them, and then, they will send the remaining amount to the state.
The reverse is also true. The state will apply any state tax refunds to your state tax debt first, and then, if any money is left over, the state will send the balance to the IRS. If there are no funds left over, the state will not send anything to the IRS.
How does the IRS or state know that I owe money?
The state reports state debts to the Treasury Offset Program (TOP). The TOP, then, seizes federal payments for state debts and sends the funds to the states. The State Reciprocal Program (SRP) seizes state payments and sends them to the federal government or other states for federal or state tax debt.
Notifications about refund seizure – what to expect in the mail
The Treasury does not have to notify you before seizing your tax refund. However, before sending your debt to the Treasury, the state department that you owe money to must send you a notice – in most cases, you will receive several notices about the unpaid debt before you lose your tax refund.
When the Treasury seizes your refund, they will send you a Notice of Intent to Offset. The IRS often sends Notice CP504B before seizing your state tax refund.
Typically, by the time you receive these notices, it's too late to reverse the process. If you want to preserve your tax refund, make sure you address these debts before you file a tax return with a refund.
How to get your refund back after a seizure
Unfortunately, it's very hard and generally impossible to get your refund back once it's been seized for unpaid debts. However, you should be able to get your refund back if there was an error or if the debt was due exclusively to your spouse. Here are more details.
Tax refunds seized in error for state debts
This can happen if the state agency provides incorrect information to the IRS. In this case, you should contact the state agency that you owe the debt to – for instance, contact child support services if you owe delinquent child support. If you're not sure how to reach the correct state agency, you can contact the Treasury Offset Program for their information.
The IRS says that if the original amount of the refund matches the amount claimed on your tax refund, you should not call the IRS. Instead, the mistake is due to the state agency, and you should contact them instead.
Refunds seized for your spouse's debts.
If the IRS seizes your joint refund for a debt due just to your spouse, you can apply to get your portion back through the injured spouse program. File Form 8379 (Injured Spouse Allocation), and if you qualify, the IRS will return your portion of the refund to you. You can also attach this form to your tax return when you file.
How to avoid having your refund taken
If you're proactive, there are a few different ways that you can avoid having your refund taken, but the options vary based on the type of tax debt and your financial situation.
Offset Bypass Refund – for financial hardship if you only owe IRS taxes
If you're facing severe financial hardship, you can ask the IRS not to seize your refund. But only if you owe federal tax debt – you cannot use this option for other types of debt. You must put in your request before the IRS applies the tax refund to your tax bill. Once the refund is applied, you cannot reverse it.
To apply for an offset bypass, contact the IRS at 800-829-1040 or reach out to the Taxpayer Advocate Service (TAS). There is no form to apply for this type of relief. You must prove that you're facing a serious economic issue, and the IRS will generally only release the portion of the refund that you need to get past the issue. For instance, if you are behind on rent or facing a utility shut-off, you may get to keep the amount that will directly fix that problem. Then, the IRS will keep the rest.
Offer in compromise on IRS tax debt.
If you owe federal tax debt that you cannot afford to pay in full, you may qualify to settle for less than owed through the offer in compromise program. The IRS will take refunds owed to you before the date the offer is accepted, but after acceptance, you will get to keep your tax refunds.
For instance, say you get an offer accepted on your tax debt on February 1, 2025. If you earn a refund from your 2024 tax return due on April 15, 2025, you will get to keep the refund (as long as you don't owe any of the other debts subject to offset).
Getting student loans out of default
To get student loans out of default, you can consolidate them (pay them off with another loan) or apply for rehabilitation. Rehabilitation requires you to submit a repayment plan and make at least nine payments over 10 months. The government typically will seize your tax refund while you are in default or during the first five months of the rehabilitation plan. After that, you can keep your refunds.
Payment arrangements on other state tax debts and child support
Contact the state agency you owe money to or the child support agency and make plans to repay your debt. They will be able to tell you if you can avoid the loss of your refund by setting up payments or if the refund will be seized and applied to your balance.
Avoiding a refund
If you're strategic, you can avoid getting a refund. For instance, if you work for an employer but you get a refund every year, adjust your W4 so that your employer takes less out of your paycheck. To ensure you don't underpay or overpay, make sure to complete the part of the form that calculates the tax if you have multiple jobs or a spouse.
Frequently Asked Questions (FAQs)
How can I find out if my refund will be taken before I file my taxes?
The government will send you notices if you owe them money, but unfortunately, there's no central database that you can check if you're unsure. You can set up an online account with the IRS and with your state to check if you owe taxes.
What happens if my refund is offset but I need the money for financial hardship?
Unfortunately, once the funds have been seized, you can generally only get them back if there is an error or if the debt was due to your spouse. You cannot get back refunds due to financial hardship.
Can my spouse’s refund be taken for my debt?
Yes, if you file a joint return, the IRS or the state can seize your spouse's portion of the refund for your debt. However, you can avoid this by attaching an Injured Spouse form to your tax return. The laws vary for community property states.
How long does it take to get a refund after an offset is applied?
If there is any money left, you should get the remaining refund about four to six weeks after the Treasury or the state seizes the refund. To check on the situation, use the IRS's Where's My Refund tool or check out the TaxCure resource on how to track missing refunds.
Will an offset affect my future refunds if I still owe money?
Yes, the IRS or the state will continue to take the refunds until the debt is paid off or expired.
Does Tax Topic 151 mean they're seizing my tax refund?
Generally, no, Tax Topic 151 typically means that the IRS is reviewing your tax refund.
Get Help With Tax Problems
A tax professional can help you ensure you're optimizing your tax situation. If you owe federal taxes, they can help you find the best resolution methods. They can also answer other questions – to learn more, use TaxCure to find a professional, and then, call for a free consultation to get the help you need to move forward.
Resources:
https://www.irs.gov/taxtopics/tc203
https://www.taxpayeradvocate.irs.gov/news/tax-tips/direct-deposit-refunds-and-refund-offsets/2025/01/
https://studentaid.gov/help-center/answers/article/what-should-i-do-if-loan-in-default
https://studentaid.gov/manage-loans/default/get-out#loan-rehab
https://acf.gov/css/faq/how-does-federal-tax-refund-offset-program-work
https://fiscal.treasury.gov/top/state-programs.html