In our last post we discussed how to track your refund. But what if your refund is issued and you only receive a portion of it, or possibly none of it? Your refund can be offset or allocated elsewhere under the Treasury Department’s Offset Program if you owe debts for things such as child support, student loans, state income tax, or unemployment compensation. Also, the IRS may offset your refund to pay taxes you owe from other tax years. Therefore, if you do not receive your full refund, you need to determine what the problem or debt is that is causing the Offset Program to allocate your refund instead of sending it to you. For some taxpayers this can cause financial problems; even if the debt is owed, the taxpayer may not be able to afford to pay such a large portion at this time. The taxpayer may have been depending on getting the full refund and then setting up other payment arrangements for the debt. Unfortunately, unless the debt can be proven invalid, it is likely not possible to get a refund and set up other payment arrangements once the refund has been offset.
There are a few things taxpayers can do in this situation. First, make sure that if you owe one of these types of debts you are working with the proper authorities to set up payment arrangements so that they do not offset your refund. Next, if you are in a situation where your refund is going to be offset, which can happen even when you have alternative payment arrangements, you want to make sure you do not overpay taxes and cause a large refund, unless you want it applied to the other debt. This can be accomplished by working with your tax advisor throughout the tax year to ensure you pay enough in taxes but do not greatly overpay, causing a large refund which could be offset. If you have questions about outstanding debts that can offset your refund, or questions about how to pay in the proper amount of taxes during the year contact us at Hone Maxwell LLP today. Also, you can follow us on twitter @HMLLPTax or facebook at www.facebook.com/HoneMaxwellLLP for more tax tips and the latest updates on tax news.