Tax Refund Offsets Explained

As tax season approaches, many people eagerly anticipate receiving a tax refund from the government. However, for some individuals, their refund may be subject to offset. This means that a portion or all of their refund may be withheld and used to pay off certain debts or obligations. In this blog post, we will explore tax refund offsets and what you need to know about them.

What are tax refund offsets?

Tax refund offsets occur when the government withholds all or a portion of a taxpayer’s tax refund to pay off certain debts or obligations. These debts may include unpaid federal or state taxes, delinquent child support payments, or outstanding federal student loans. The government may also use tax refund offsets to satisfy other types of debts owed to federal agencies, such as the Department of Agriculture or the Small Business Administration.

How does the offset process work?

The offset process typically begins when a taxpayer owes money to a federal or state agency. The agency will send the taxpayer a notice explaining the debt and requesting payment. If the taxpayer fails to pay the debt or make arrangements to pay it off, the agency may initiate the offset process.

The agency will send a notification to the Department of Treasury’s Bureau of Fiscal Service, which is responsible for disbursing tax refunds. The FMS will then offset the taxpayer’s refund by the amount owed, and apply it to the outstanding debt. Any remaining refund amount will be issued to the taxpayer.

What are the consequences of tax refund offsets?

If your tax refund is subject to offset, you will receive a notice from the BFS explaining why your refund was reduced or withheld. The notice will also provide information on how to dispute the offset if you believe it was in error.

Tax refund offsets can have significant consequences for taxpayers who are relying on their refund to pay bills or cover other expenses. If you are anticipating a tax refund and are concerned about potential offsets, it is important to address any outstanding debts or obligations before filing your tax return.

How can you avoid tax refund offsets?

The best way to avoid tax refund offsets is to stay current on all of your financial obligations. This includes paying your taxes on time, making regular payments on your student loans, and keeping up with your child support obligations. If you do fall behind on your payments, it is important to work with the relevant agency to make payment arrangements and avoid the offset process.

Tax refund offsets can be a frustrating experience for taxpayers who are counting on their refund to cover regular living expenses. By staying current on all financial obligations and addressing any outstanding debts, you can help avoid the offset process and ensure that you receive your full refund amount. If you do receive a notice of offset, be sure to carefully review the information provided and take action to dispute the offset if necessary.

If you are concerned that your refund may be offset, you can check by calling BFS at 1-800-304-3107.


Posted: May 24, 2023

Want more info? We will contact you back within 1 business day.






  • Be your clients’ hero! Our in-house Sure & Secure IRS Audit coverage makes you a true Problem Solver!


  • Ready to offer tax services to undocumented aliens? We have the training and support to make it happen!


  • Federal Direct provides back office support to free your business up to GROW!


  • Federal Direct knows the focus and dedication it takes to grow your tax business!


Want more info? We will contact you back within 1 business day