If you’re like many taxpayers, you look forward to tax season — also known as tax refund time — every year. So, naturally, one of the worst pieces of news you could receive is that the Internal Revenue Service, or IRS, has decided to garnish your tax refund. Here’s a look at why you may lose your tax refund to the IRS, according to TaxAudit, a leader of tax audit representation and defense services.
The IRS may decide to keep a refund so as to offset government debt that you owe. Unfortunately, the federal agency has the authority to do this without giving you prior notice. To make matters worse, it is virtually impossible to reclaim a tax refund once it has been garnished. However, you may be able to get your refund back if you can prove that you are experiencing economic hardship or if you meet the conditions for an injured spouse claim, for example. A refund could also be reclaimed if your spouse owes money to the IRS and you qualify for innocent spouse relief.
The debts that most frequently result in tax refund garnishment include student loans that have not been paid, child support payments that are past due, and income tax that has yet to be paid. Still, garnishment may also happen if you have unemployment debt at the state level, spousal support debt, or overdue income tax at the state level.
If you end up not receiving a refund as expected, the United States treasury department can let you know which federal government agency decided to flag your refund. Then, you can contact this agency and try to establish a payment plan once you have validated the agency’s information regarding your tax debt. The sooner you can take these steps, the sooner you may remedy your tax situation.