IRS Notice of Intent to Offset: Meaning, Reasons, and What To Do

Have you received a notice of intent to offset? Contact Tax relief Helpers California

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Receiving a letter from the IRS is always a little scary, especially if you weren’t expecting it and don’t fully understand what it means. 

If you’ve received a Notice of Intent to Offset, first of all, don’t panic. 

In a nutshell, a Notice of Intent to Offset means you owe money to the IRS or another government agency, and the IRS plans to use your tax refund to offset that debt. 

However, as it says in the name, this letter is a “notice of intent”, which means it’s a warning or explanation of something that will happen soon, but not immediately. 

This means you have time to both understand it, and to deal with it – whether alone, or by instructing the help of experts such as Tax Relief Helpers
Keep reading to find out exactly what a Notice of Intent to Offset is, how it works, and what you need to do if you’ve received one.

What is a “Notice of Intent to Offset”?

The notice itself is an official communication. It’s a letter issued by the IRS or BFS (the Treasury’s Bureau of Fiscal Services) informing you of their intention to withhold all or part of your federal tax refund to cover an unsettled debt you owe to the IRS or another government agency. 

Simply put, a Notice of Intent to Offset is a letter warning you that the IRS is about to seize your tax refund. 

The notice will include the following critical information, which enables you to double-check that the intended deduction is correct: 

  • Your full name 
  • The amount of your original IRS tax refund
  • The amount that will be offset to settle your debt, and the adjusted total you will receive (if any)
  • The agency that will receive the tax offset payment (i.e. where the debt is from)
  • The agency’s contact information (if you need to check or dispute the debt)

It’s vital that you check all this information is correct as soon as you receive the notice, so that you have time to dispute, contest, correct, or otherwise deal with it. 

Given the rise of fraudulent attempts in the US, it’s also important to check the agency contact information is correct to verify the authenticity of the notice. 

Notice of Intent to Offset: meaning and consequences

If you receive a Notice of Intent to Offset, it means you have a federal or governmental debt – such as back taxes, unpaid child support, or delinquent student loans – which the IRS is going to use your tax refund to settle. 

Sometimes these debts come from innocent mistakes, sometimes from more deliberate evasion, but whatever the case, the IRS will pursue every opportunity to recover that debt, and a tax offset will usually be the first. 

If you do not take any action when you receive the notice, your tax refund will be seized and used as stated. If the offset amount covers your entire debt, there are no further consequences. 

However, if the tax offset doesn’t cover the full amount of your debt, then you still have a tax debt that the IRS will need to recover. They may do this using other more serious methods such as tax liens and levies, and you will additionally face penalties and interest charges. Your future tax refunds will also be offset until the debt is cleared. 

It is therefore vital to take action as soon as you receive a Notice of Intent to Offset

Firstly, to ensure the debt is accurate and current, and you won’t have your tax refund unfairly seized. Secondly, to ensure you resolve the debt in the best possible way to avoid further penalties and seizures of your tax refunds or other assets. 

How does the offset program work? 

The Treasury Offset Program (TOP) is run by the Department of Treasury’s Bureau of Fiscal Services (BFS) – the government agency that processes all federal payments, including the handling of federal tax refunds.

The BFS also has access to information about delinquent debts owed to certain government agencies, which are attached to each individual’s tax identification number and name. 

Before processing a tax refund, the BFS will check your tax number for any eligible debts associated with your name and number, and if there are any, your refund will be earmarked for deduction to settle the debt, and you’ll be sent the Notice of Intent to Offset. 

If you do not contest the intent to offset or make alternative arrangements to settle the debt, the money will be withheld as stated and then issued to the agency where the debt is owed. 

If any of your tax refund remains after the deduction, the balance will be issued to you by the BFS per your original request – either by check or by direct debit. 

What debts can the IRS use my tax refund to offset? 

The Treasury Offset Program (TOP) can only use your tax refund for certain eligible types of debt. 

These include: 

  • Federal tax debt (back taxes)
  • State income tax debt 
  • Past-due child support and spousal support
  • Federal non-tax debt (e.g. student loans, salary and benefit overpayments, unpaid fines and penalties, etc) 
  • Certain unemployment compensation debts

In addition to using your federal tax refund to offset these debts, there are also a few other types of federal payments from which the BFS can deduct funds to offset. 

These include: 

  • Federal salaries (e.g. military wages) 
  • Federal pension payments 
  • Contractor or supplier payments from doing business with the government
  • Federal travel advances and/or reimbursements
  • State income tax refunds 
  • Some federal benefits (such as Social Security benefits, other than Supplemental Security Income)

The rules behind the government’s ability to issue intent to offset federal payments varies by payment type, however. For example, 100% of your federal tax refund can be used to offset a debt, but only 15% of your payments for social security benefits. 

What to do if you receive a Notice of Intent to Offset

As with any kind of letter from the IRS, if you receive a Notice of Intent to Offset you should take immediate action. 

First, check that all details on the notice are correct and that the debt is accurate and current. 

Next, you need to decide whether you want to fight the offset or not…

  • If the debt and all other information is correct and you are happy for it to be taken from your tax refund, you don’t need to take any further action. The debt will simply be deducted as stated in the notice, and you’ll receive payment of the remaining balance of your refund accordingly. 
  • If you want to contest or stop the offset, or if any of the details are incorrect, there are a few options depending on the circumstances, as outlined below. In all cases, the expert team at Tax Relief Helpers can assist you with navigating this process, and are your best option for ensuring you handle the process as smoothly and painlessly as possible. Call us on (800) 659-6706 or schedule a free consultation to get the ball rolling. 

Avoiding or fighting a tax refund offset – what are your options? 

Once you receive your Notice of Intent to Offset, you only have about 60 days to contest or appeal against the offset, or to settle the debt, before the deduction will be made. 

Given the short timeframe and the complexity of all things tax-related, it’s highly recommended to seek help from tax experts, such as the team here at Tax Relief Helpers

We’ll be able to advise you on what you need to do, your best options, and also handle all communications and negotiations on your behalf, taking the stress off your shoulders and ensuring the best possible outcome. 

However, here’s a brief overview of the options that are available to you if you want to contest your Notice of Intent to Offset:

If you disagree with the debt amount listed and want to dispute the tax offset, you need to contact the agency that will be receiving the payment and open the dispute with them. There is a limited timeframe in which you can do this, so it’s vital to act quickly, as it’s much harder to contest the offset once the deduction has already been made. 

If you filed a joint tax return and the debt belongs solely to your spouse, you may be able to file an Injured Spouse Claim to receive your portion of the offset amount. 

If the debt is correct, but you want to try and avoid an offset, negotiating debt relief or repayment plans with the IRS (or other relevant agency) is the best option. 

Bear in mind that even if you reach an agreement to reconcile your debt in another way, there’s no guarantee this will avoid the offset. However, this is still usually the best solution in terms of reducing your debt as quickly as possible and avoiding further penalties or risk of seizure of your other assets

The only way you can be sure to avoid an offset altogether is to pay off the full balance of your debt before the 60-day deadline, including any penalties and interest. Given that this often isn’t possible, exploring your other options with the help of Tax Relief Helpers is the best way to ensure you can resolve your tax debt as quickly and painlessly as possible. 
Contact us today for a free consultation, and find out how we can help you manage your federal debts, apply for tax debt relief, and protect your tax refund.