If you’re expecting a tax refund but owe back taxes, student loans, or other government debts, you may be in for an unpleasant surprise:
Yes, the IRS can take your refund.
This process is called a tax refund offset, and it’s one of the fastest and easiest ways the government collects unpaid debts. The IRS will inform you of this by sending out a CP16 Letter.
Unlike wage garnishments or bank levies, refund seizures occur automatically and often before you even see the money.
Understanding how refund offsets work (and how to stop them) is critical if you’re dealing with tax debt.
A refund offset occurs when the IRS applies your tax refund to an outstanding debt instead of sending it to you.
Rather than issuing a payment, the IRS redirects the funds to satisfy what you owe.
This authority derives from federal collection laws that allow the government to apply overpayments to existing liabilities.
Your refund can be taken for more than just IRS tax debt.
Through the Treasury Offset Program (TOP), refunds may also be applied to:
Yes, but many taxpayers overlook the notice.
You’ll typically receive:
After seizure, you’ll receive Notice CP49 explaining:
Yes.
Refund offsets continue annually until the debt is paid, resolved, or becomes legally uncollectible.
If you consistently overwithhold taxes, you may be funding your own debt repayment.
Yes, but through coordination programs.
State refunds can be intercepted for:
Each state participates differently, but most cooperate with federal offsets.
Usually, yes.
Even if you’re in an Installment Agreement, the IRS will still offset refunds.
Why?
Because refunds represent overpaid taxes — money already owed to the government.
However, refunds may be preserved in limited cases involving:
If you file jointly but your spouse owes debt, you may still recover your portion.
This is filed using Form 8379.
You generally can’t reverse an offset unless: