If you're still waiting for your federal income tax refund this year, here's one reason it might be delayed: the government might have seized it. The same federal agency that issues tax refunds, the U.S. Department of the Treasury, also has the authority to hold back all or part of your refund to repay debts that you owe. This is done by the department's Bureau of the Fiscal Service. In bureaucratese, this is known as an "offset."

Key Takeaways

  • The IRS can seize some or all of your refund if you owe federal or state back taxes.
  • It also can seize your refund if you default on child support or student loan debts.
  • If you think a mistake has been made you can contact the IRS.

There are six reasons the IRS can seize your refund. Here's what they are, and what you can do about it.

6 Reasons the IRS Can Seize Your Tax Refund

All six reasons are related to personal debt that a taxpayer has failed to repay on schedule.

The Treasury Department also can garnish your Social Security or Social Security Disability Insurance (SSDI) benefits to collect back debts.

You Owe Federal Income Taxes

If you owe back income taxes, your refund can be taken to pay or offset the amount due. If anything is left, it will be refunded to you in the way you requested on your tax return, either by direct deposit or check. You should also get a notice from the IRS explaining why the money was withheld.

If you believe that a mistake was made, you can contact the IRS. The number to call is (800) 829-1040. 

You Owe State Income Taxes

The feds can also withhold money from your tax refund to cover any unpaid state income taxes.

The first call should go to the IRS at (800) 829-1040. Since a state government also is involved, you could be in for a run around on this one.

You Owe State Unemployment Compensation

If your state believes you collected more in unemployment compensation than you were entitled to receive, either due to outright fraud or to a failure to properly report your earnings, it can ask the U.S. Treasury to offset your tax refund by the amount in dispute.

See above for your first step. It's the IRS at (800) 829-1040. You need to be ready to prove that you rightfully received that unemployment compensation.

You Defaulted on a Student Loan

If you defaulted on a federally-insured student loan, the government can seize your tax refund to offset the amount you owe.

In this case, the Treasury Department is required to send you advance notice of its intention and to provide an opportunity for you to challenge the claim or pay it off before your refund is withheld.

By the way, your state also is authorized to withhold money from your state tax refund for this purpose. In addition, both the U.S. Department of Education and the guaranty agency that holds your loan have the authority to order your employer to withhold up to 15% of your disposable income until the loan is paid off.

You Owe Child Support

When a parent is delinquent in paying court-ordered child support, the state’s child-support agency can request that the Treasury Department withhold money from the person's tax refund to cover the back payments.

A person in this situation should receive a pre-offset notice explaining how much is owed, how the offset process works, and how to contest the debt. Once the money has been withheld from the refund, the taxpayer also should receive an offset notice from the Bureau of the Fiscal Service showing how much money was withheld.

Anyone in this situation should contact the state child support agency for further information.        

You Owe Spousal Support

An award for spousal support that is part of a child support order can also result in a tax-refund offset if the payments are overdue.  

On a related note, if you filed a joint tax return with your spouse and your refund was offset because of debts belonging only to the spouse, you can request your portion of the refund back from the IRS. To make a claim, the taxpayer must file Form 8379: Injured Spouse Allocation.

Other Ways the Government Can Collect

Your tax refund is not the only leverage the Treasury can use to collect on back debts. Your Social Security or Social Security Disability Insurance (SSDI) benefits can be garnished (that is, partially withheld) in some instances.

However, supplemental security income cannot be garnished, even by the government. This is a program that provides a basic income to people who are aged, blind, and disabled people, and it's not part of the Social Security system.