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If you were counting on your tax refund to pay rent, cover groceries, or catch up on bills, it can be devastating to learn that your refund has been reduced, or taken entirely to pay an old debt. This happens when the IRS or the Bureau of Fiscal Service (BFS) offsets your refund to pay an existing debt. This is called a refund offset.
Before you file, to protect your refund and avoid unexpected financial stress, it’s important to understand:
A refund offset is when all or part of your federal tax refund is used to pay past-due child support or a debt you owe to the IRS, another federal agency, or a state. The authority for refund offsets comes from IRC § 6402 and related Treasury rules. When you file a tax return and claim a refund, the IRS certifies the refund amount and sends the information to BFS. BFS checks whether you owe certain debts and may reduce your refund to satisfy them – before issuing the refund payment. In the event of an offset, BFS will send a notice indicating the date and amount of offset, creditor agency to which offset money was sent, and contact point within the creditor agency.
It’s important to know what kinds of debts can trigger a refund offset. IRS account information will include information about federal tax debts from prior tax periods but will not include information about debts to other agencies.
If you’re concerned about a possible refund offset, you should determine whether a debt exists. Log into your IRS Online Account to view your federal tax balance and payment history. If your account shows a balance due, the IRS will offset your refund to satisfy that amount. If you can’t access your online account, you can call the IRS at 800-829-1040 and ask about any outstanding balance, including any outstanding tax debts from prior tax periods. If you owe federal taxes, your refund may be applied to that debt.
To find out if you owe non-federal tax debts that could reduce your refund, call BFS at 800-304-3107. This automated service will tell you if a non-federal tax debt could reduce your refund and to which agency the debt is owed. Taking these steps before filing can help you avoid surprises.
If an offset has already occurred, carefully review and retain any notices about the offset. The notice should indicate who received your offset payment and how much was applied. The IRS cannot resolve debts owed to other agencies; you must contact the creditor agency directly.
Many taxpayers depend on their refund to pay essential living expenses. If losing your refund would prevent you from paying for necessities like housing, utilities, food, or medical care, you may qualify for relief – but you must act before the offset occurs.
A hardship exists when you cannot meet basic living expenses without your refund. Examples include:
If this applies to you, there may be an option called an Offset Bypass Refund (OBR).
An OBR allows the IRS, in limited situations, to issue you part of your refund to relieve hardship before applying the rest to your federal tax debt. OBRs apply only to federal tax debts, not to other debts that can result in an offset, such as past-due child support or other non-federal debts – even for hardship reasons.
You must request an OBR before an offset occurs. Once a refund is applied to another debt, OBR relief is no longer available. If an OBR is granted, it will only cover the amount necessary to relieve the hardship; the rest is applied to your other debt.
For example, if you are due a refund of $4,000 and your outstanding federal tax liabilities exceed that amount, under normal procedures the IRS will apply the total refund toward the outstanding federal tax liabilities, leaving no overpayment available to be refunded. The OBR procedures are an exception to that refund offset and provide immediate relief to those taxpayers experiencing financial hardship. If you establish a hardship of $1,000, the IRS will issue a $1,000 refund and apply the balance of $3,000 to your outstanding tax liabilities.
Timing is critical. There is only a short window to request an OBR.
The OBR procedure is not a well-known option and there is a very narrow window of time in which you can request an OBR and establish your hardship amount. You should file your tax return timely and request an OBR at the time of filing. File your original return with the IRS to establish your filing date. If you need your refund quickly, you should consider filing electronically and submitting your OBR request right away.
You must gather documentation showing your economic hardship, such as eviction notices, utility shut-off notices, medical bills, etc. If you need additional time to gather documentation proving your economic hardship, you may want to file your return with the IRS on paper via certified mail.
Call the IRS at 800-829-1040 to request an OBR when you file your return and follow their instructions on how to submit documentation of your hardship.
If you owe a federal tax debt and are facing economic hardship, TAS may assist you in requesting an OBR and navigating the process. Complete Form 911, Request for Taxpayer Advocate Service Assistance and file the form with a copy of your completed tax return and hardship documentation to your local TAS office. Because timing is so critical, call your local TAS office to confirm your Form 911 and OBR request has been received.
Refund offsets are complicated and often unexpected, especially for taxpayers who rely on refunds to meet basic needs. Understanding what debts can trigger offsets – and how to check for them in advance – is critical. If you are facing economic hardship and have a federal tax debt, acting early and documenting your situation can make the difference between receiving your refund when you need it or losing it entirely to offset.
If you are concerned about an offset, do not wait. Early action is imperative.
The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget. NTA Blog posts are generally not updated after publication. Posts are accurate as of the original publication date. Portions of this blog may have been developed with the assistance of artificial intelligence. All AI-assisted content has been reviewed, verified, and approved by the National Taxpayer Advocate or TAS staff to ensure accuracy and integrity.