Money Minute: Beware of Tax Refund Offsets

Many taxpayers expect their full refund, but one surprise many encounter is a tax refund offset—where the government takes part or all of the refund to cover unpaid debts.

3 Key Ways Tax Refund Offsets Can Impact You:

1. Unpaid Debts: If you owe child support, spousal support, state income taxes, or federal debts (like student loans), the Treasury can automatically take part or all of your refund.
2. Notice CP49: The IRS sends Notice CP49 if your refund has been offset. It includes your original refund amount, the offset amount, and which agency received the payment.
3. Joint Filers Beware: If only your spouse owes the debt but you file jointly, you can protect your share of the refund by filing Form 8379 (Injured Spouse Allocation).

How to Avoid This:

• Check for Debts: Ensure you don’t owe child support, student loans, or other federal/state debts before filing.
• Minimize Your Refund: Adjust your withholding so there’s less refund to offset.
• Respond Quickly: If you receive a Notice CP49, resolve the issue fast by paying off the debt or disputing it with the agency listed.

Don’t let an unexpected offset catch you off guard—stay proactive and protect your refund.

As promised, advice in under a minute.