Have you ever asked yourself the question: what is a tax refund offset? Do you want to know how it works? Read on to learn more.
Book a Consultation Call170 million people filed tax returns in the year 2020. 126 million of those taxpayers were happy because they also got an IRS refund. This means 74% of all the people in the US who file taxes typically garner a tax refund.
Are you one of the millions excitedly awaiting your tax refund?
Before you get too excited, do you owe the federal government any money? Do you have an SBA loan in default?
If you're behind, get prepared because your tax refund can be withheld. This is called a tax refund offset.
How does a tax refund offset work? How do you get your refund if you don't want the IRS keeping it?
Unfortunately, the SBA usually finds a way to get their money before letting you have it. Read on to learn more about tax refund offsets, how they work, and why the IRS can offset your refund for a defaulted SBA loan.
If you've been excitedly awaiting a tax refund and found the refund to be much smaller than anticipated, or even worse, you didn't get one.
You might be experiencing a tax refund offset.
When you owe monies or are in arrears, the IRS can prevent your tax refund from being paid out to you by sending the funds to the SBA.
The US Treasury Department would notify you they are about to do an offset to cover a delinquent debt. If you're notified of this and had questions about a delinquent debt, you can call 800-304-3107.
Now and then, there's a scenario where the reduced IRS refund beats the explanation letter. You can contact the IRS for an explanation.
In most cases, though, you'll receive a letter before the offset occurs. The letter will include:
If you get this letter, you would be best served to direct your questions to the entity listed as receiving your money.
You might be wondering what you're behind on, defaulted on, or in arrears before the IRS will make an offset payment?
The good news is that the IRS can't do an offset payment to cover any late bills for private lenders or utilities. They won't take your tax refund if you're behind on your cable bill or credit card bill.
There are, however, several reasons you might get a tax refund offset. If you have any arrears with the federal government, you should assume it could trigger a tax refund offset.
However, for purposes of this article, the reason you are most concerned about a tax refund offset is due to a defaulted SBA loan.
The IRS automatically take any refunds to cover back taxes before even considering a tax offset for an SBA loan.
It's also worth noting that if your offset is related to a federal tax issue, you'll be notified by the IRS. If your offset is for any other reason, then you'll be notified by the Treasury Department’s Bureau of the Fiscal Service (BFS).
There might be a situation where one spouse owes something, and the IRS triggers a tax refund offset. What's tricky is if the married couple files their taxes jointly.
This could mean that the expected tax refund that one spouse thought was coming is instead an offset for the other's debt. Aside from making for quite an awkward dinner conversation, there is something that can be done to get a refund for the non-owing spouse.
You can contact the IRS 800 number, visit your local IRS office, or perhaps the easiest option is to visit the IRS website. You can download and complete IRS Form 8379.
It may not be a fast process, and you'll likely need to provide some documentation, but you can request one spouse's part of the refund money.
If you believe the offset is in error, you can challenge it. In some cases, the offset will be processed while the challenge progresses.
In most cases, when you're notified of the offset, you'll also be provided with directions on how to challenge if you disagree.
Remember, don't start the challenge process just because you don't like the tax offset. You'll need to provide documentation of why the tax offset is being done in error.
Perhaps it's for a debt that's been paid off or you have a payment plan in place for the SBA loan.
A good place to start is by calling your local IRS office to get started. If your offset isn't tax related, contact the Bureau of the Fiscal Service (BFS) as they will have all other offset information for your case.
If you haven't already sought advice for your debts, it might be time to do that before you proceed with challenging an offset. Seek the advice of our SBA attorneys to get tax refund offset advice.
Once you find yourself in conflict with the IRS or the Treasury Department, it's time to seek some professional guidance on the best way to proceed. They may also be able to help you with the best way to challenge an offset and use the right documentation to win your appeal.
Once you have a tax refund offset explained, you can understand how frustrating and upsetting it will be to receive a letter notifying you of a tax refund offset.
If you have questions about your tax offset, we can help. Contact the Protect Law Group so we can get to work helping you.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Client's small business obtained an SBA COVID EIDL for $301,000 pledging collateral by executing the Note, Unconditional Guarantee and Security Agreement. The business defaulted on the loan and the SBA CESC called the Note and Guarantee, accelerated the principal balance due, accrued interest and retracted the 30-year term schedule.
The loan was transferred to the Treasury's Bureau of Fiscal Service which resulted in the statutory addition of $90,000+ in administrative fees, costs, penalties and interest with the total debt now at $391.000+. Treasury also initiated a Treasury Offset Program (TOP) levy against the client's federal contractor payments for the full amount each month - intercepting all of its revenue and pushing the business to the brink of bankruptcy.
The Firm was hired to investigate and find an alternate solution to the bankruptcy option. After submitting formal production requests for all government records, it was discovered that the SBA failed to send the required Official 60-Day Pre-Referral Notice to the borrower and guarantor prior to referring the debt to Treasury. This procedural due process violation served as the basis to submit a Cross-Servicing Dispute to recall the debt from Treasury back to the SBA and to negotiate a reinstatement of the original 30-year maturity date, a modified workout, cessation of the TOP levy against the federal contractor payments and removal of the $90,000+ Treasury-based collection fees, interest and penalties.
Clients executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate and collect all pledged collateral pursuant to the trust deed instruments.
The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.
After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.
Clients' 7(a) loan was referred to Treasury's Bureau of Fiscal Service for enforced collection in 2015. They not only personally guaranteed the loan, but also pledged their primary residence as additional collateral. One of the clients filed for Chapter 7 bankruptcy thinking that it would discharge the SBA 7(a) lien encumbering their home. They later discovered that they were mistakenly advised. The Firm was subsequently hired to review their case and defend against a series of collection actions. Eventually, we were able to negotiate a structured workout for $180,000 directly with the SBA, saving them approximately $250,000 (by reducing the default interest rate and removing Treasury's substantial collection fees) and from possible foreclosure.
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