Did you recently receive a Notice of Intent to Offset in the mail and have no idea what to do next? Before you panic, understand that it’s likely the result of an unpaid tax bill or debt owed to a federal or state government agency, and the government is planning to use your tax refund or other federal repayments to settle the balance. It’s equally important to know that there are effective ways to handle offsets without putting your financial health at risk.
In this guide, you’ll learn more about Notices of Intent to Offset and how they work, along with ways to handle them and where to look for professional tax relief help if needed.
What Is A Notice Of Intent To Offset?
A Notice of Intent to Offset is a document from the Internal Revenue Service (IRS) or your state tax authority that communicates its intent to seize your tax refund or other federal and state tax payments and apply it to your outstanding tax bill.
You could also receive the same notice if you owe money to another government agency.
How The Treasury Offset Program Works
These documents are prepared by the Treasury Offset Program (TOP), which is operated by the Bureau of the Fiscal Service (BFS). Each time you file a tax return and are owed a refund, the IRS searches its database to ensure you don’t owe federal or state tax debt. Since other government agencies often report delinquent accounts to the BFS, information about these debts could also appear during the search.
If you owe money, it triggers the system to create a Notice of Intent To Offset. Your federal or state tax refund or other federal tax payments will likely be seized and applied to your balance(s). The latter includes:
- Federal wages and retirement payments
- Military salaries and retirement benefits
- Federal payments to contractors or other vendors who conduct transactions with the federal government
- Social Security benefit payments
- Travel advances or reimbursement for travel expenses paid to federal employees
Be mindful that federal laws are in place to limit the amount of your tax refund, or federal tax payments that can be withheld. Also, debts typically aren’t reported to TOP until they’re at least 90 days delinquent.
Types Of Treasury Offset Debts
Beyond federal and state income tax bills, these debts could also be included in the TOP:
- Delinquent student loan balances
- Select unemployment compensation owed to a state agency
- Other outstanding balances owed to federal agencies
- Unpaid child support and alimony
What To Do If You Receive A Notice Of Intent To Offset Your Refund?
How you respond to a Notice of Intent to Offset will depend on whether it’s accurate or contains errors.
If Everything Is Correct
No additional action is needed on your behalf, and you should be on the lookout for another notice when the offset is complete.
If You Want To Dispute The Amount
Promptly reach out to the agency that sent the notice and request to file a dispute. You could get off the hook for an offset in these situations:
- You remit what’s due to the respective agency within 60 days of receiving the notice.
- You’ve already paid the amount listed on the notice.
- You’ve filed Form 8379 to claim an injured spouse allocation.
It’s possible to enter into an installment agreement for unpaid federal and state income tax. However, offsets of your refund will likely continue until you pay the total amount you owe.
If the offset is related to federal student loan debt, you can possibly avoid further action if you’re making the required monthly payments toward the balance owed.
Frequently Asked Questions
Below are some frequently asked questions related to Notices of Intent to Offset.
How Do I Know If My Tax Refund Has Been Offset?
You’ll receive a notice in the mail before your tax refund is offset. Once the offset takes place, you will get another notice that discloses the amount of your refund, the amount that was offset, the agency that received compensation and their contact information.
How Are Offsets Different From Other IRS Penalties?
Tax offsets are just one of several methods the IRS uses to collect back taxes or recoup funds owed to other federal agencies. But unlike levies, tax liens and wage garnishments, they can be implemented more quickly without going through several steps.
Do I Have To Reply To A Notice Of Intent To Offset?
You’re not required to reply to a Notice of Intent to Offset unless there’s a discrepancy and you wish to file a dispute.
