Unpaid Debt Can Affect Your Refund

Get ahead of your debt so you don't pay for it with your tax refund.

Outstanding debt is never a good thing for your credit score or your taxes. If you owe a past-due debt, it can negatively impact your federal tax refund.   

The Treasury Department’s Offset Program can apply all or part of your tax refund to pay off outstanding federal or state debt.    

Here are five facts to know about tax refunds and offsets. 

  1. The Bureau of Fiscal Service runs the Treasury Offset Program. 
  2. Debts such as past due child support, student loan, state income tax, or unemployment compensation may reduce your refund. BFS may use part or all of your tax refund to pay the debt.  
  3. You will receive a notice if BFS offsets your refund to pay your debt. The notice will list the original refund amount and offset amounts. It will also include the agency that received the offset payment and their contact information. 
  4. If you believe you do not owe the debt or you want to dispute it, contact the agency that received the offset. You should not contact the IRS or BFS. 
  5. If you filed a joint tax return, you might be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund, file Form 8379, Injured Spouse Allocation. 

Some states may also offer an offset program. 

Here are some more tips for paying off your debt. 

  • Stick to a budget. 
  • Consider debt consolidation. 
  • Pay off high-interest debt, like credit cards, first. 
  • Apply bonuses, refunds, and any extra money you earn towards paying off your debt. 
  • Pay more than the minimum balance. 
  • Set up automatic payments so that you don’t have to physically make the payment every month. 


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