Treasury Offset Program: Refund Held to Pay Other Debts

The Treasury Offset Program is a federal program where the government will hold payments it owes you to cover your debts. While the government generally has the right to do this, there are times when you can successfully challenge the offset and receive your tax refund or other payment.

This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.

What the Treasury Offset Program Covers

The Treasury Offset Program works with both federal and state agencies. Common debts include tax debts, delinquent student loans, and past-due child support.

Common payments they can hold include:

  • Tax refunds
  • Government salaries
  • Social Security
  • Other government benefits
  • Government contractor or vendor payments

IRS Refund Adjustments

The IRS may adjust your tax refund for taxes you owe that may or may not be included in the Treasury Offset Program. The IRS generally has the right to adjust your tax return and hold your refund.

The IRS will send a notice or letter any time they adjust your return or hold part of your refund. The notice or letter will explain why they held your refund and how to contact the IRS if you disagree.

How the Treasury Offset Program Works

The Treasury Offset Program allows federal and state agencies to put debts into a database. When government agencies issue payments, they check the database. If you owe a debt, they will hold all or part of your payment to cover the debt.

You will normally receive notice that you owe a debt and that your tax refund or other payments may be withheld if you don’t pay. You may not receive notice that a specific payment will be held. If the government holds a payment, it will send you a notice saying why.

Disputing a Debt

The Treasury Offset Program requires agencies to send you a letter giving you a chance to dispute the debt. This must occur at least 60 days before they send your debt to the Treasury Offset Program.

The letter should explain how to appeal. Contact a tax or legal professional if you’re not sure how to respond.

Offset Amounts

How much can be withheld depends on the type of payment.

  • Federal tax refunds: 100%
  • Travel reimbursements to federal vendors and employees: 100%
  • Federal salary: 15% of disposable pay, 50-65% for child support debts
  • Federal retirement pay: 15% for tax debts, 25% for nontax debts
  • Social Security and Railroad Retirement: 15%
  • State payments: Varies by agreements between government agencies, usually similar to above

Special situations for tax year 2021 filed in 2022:

Common Treasury Offset Program Issues

I Don’t Owe a Debt

You must resolve the issue with the agency that thinks you owe money. They are responsible for refunding you if appropriate.

For example, you must contact your state if you don’t receive your federal tax refund because your state said you owe back taxes. The IRS will still pay your refund to the state, and your state is responsible for returning any money that shouldn’t have been withheld.

Our Joint Refund Was Held to Cover My Spouse’s Debt

If the debt is solely your spouse’s responsibility, you may be entitled to receive your portion of the refund. See Form 8379: How to Get Your Tax Refund as an Injured Spouse for more information.

My Ex-Spouse Owes Me Child Support

Contact your state’s child enforcement agency. Individuals can’t make a claim through the Treasury Offset Program.

Money Held for Child Support Wasn’t Applied to My Account

If your federal payment was held to cover overdue child support, the federal agency pays it to the Office of Child-Support Enforcement in the Department of Health and Human Services. Health and Human Services then pays the money to the state. This process may take several weeks.

If a child support agency or court continues to contact you about overdue child support, you can show them the notice you had money withheld. Contact your lawyer if they are threatening additional penalties.

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All comments are public and may be posted with or without edits. Don't include any sensitive information. This is not the IRS — I did not send you a letter or hold your refund.

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