Notice of Intent to Offset

What is a notice of intent to offset? Why is the IRS taking your tax refund?

If you owe back taxes, child support, or other government debts, the IRS may seize your refund – this is called a refund offset. It can be debilitating to taxpayers who need their refunds, but unfortunately, there are only a few ways around it. 

This article explains what to expect if you receive a notice of offset, how to respond if you disagree, and how to protect your refund from future offsets.

Key takeaways

• Refund offset – when the IRS or state seizes your tax refund for unpaid government debts. 
• Debts leading to offsets – unpaid state of federal taxes, child support, defaulted student loans, unemployment overpayments. 
• Other income at risk of seizure – payments to federal contractors, federal employees, and federal retirees. 
• How to avoid – Make arrangements to pay off government debts before getting tax refunds. 

Wondering why you received a notice of intent to offset? Worried that you won’t get your refund? Then, call us for help. At the W Tax Group, our tax attorneys can help you deal with refund offsets and other tax issues. 

Table of contents

• What is a notice of intent to offset?
• How to respond if the IRS plans to seize your tax refund
• How tax refund offsets work
• Example of the tax refund seizure process
• Unpaid bills that lead to tax refund seizure
• Other payments that may be seized
• State refund offsets
• FAQs about refund offsets

What is a Notice of Intent to Offset?

The intent-to-offset notice is an IRS notice alerting you that the IRS is going to seize your federal or state tax refund for unpaid debts. The IRS does not have to send you this notice before seizing your tax refund – often, by the time you receive the notice, your refund has already been seized. 

What’s on the notice?

The notice of intent to offset should include your name, the amount of your refund, the amount of the offset, and how much of a refund you will receive after the offset. It also includes the name of the agency you owe money to, how to contact them, and how to dispute the offset. 

Is it legit?

If you’re worried that the notice might be fake, contact the IRS at their main number for individuals – 1 (800) 829 – 1040. Unfortunately, scammers like to use scare tactics like fake tax notices to trick people into sharing personal information such as bank account details or Social Security Numbers. Remember that the IRS will always contact you by mail about refund offsets. They will not call you or show up at your home unannounced. 

How to respond to a notice of offset

Unfortunately, if the debt is real and unpaid, there’s not a lot you can do to protect your tax refund. But here’s how to respond in a few different scenarios.

If losing the refund will put you in economic danger

You may qualify to avoid an offset if you show that losing your refund will put you in immediate economic danger, but only if the debt is for unpaid taxes. 

To apply, contact the Taxpayer Advocate Service and ask for an offset bypass refund (OBR) – be prepared to prove your hardship. For example, you may need to show proof that you will face homelessness or have utilities shut off if you do not get your tax refund.

If you disagree with the debt in the notice

If you disagree with the debt, contact the agency that says you owe money directly. If you call the IRS, they won’t be able to help you. If you have already paid the bill or have an established payment plan, find out why the agency referred your debt to the Treasury Offset Program. 

For example, if the notice says you owe delinquent child support, you need to call the child support services office in your state. Even if there has been an error, the IRS will not be able to help you. 

If you agree with the debt

If you agree with the debt shown on the notice, you don’t need to do anything right now. However, if your tax refund doesn’t cover all of your liability, you should reach out and make arrangements to pay the rest of the bill. Then, you don’t have to worry about your refund being offset next year.

If the offset is your spouse’s fault

If the debt is owed by your spouse, you can apply to get your portion of the joint tax refund back through the injured spouse relief program. You can apply for up to two years after the refund was seized, or if you know that your spouse owes money to the government, you can apply proactively by attaching an injured spouse form to your tax return. 

Note that you probably won’t get exactly half of the refund. Instead, you’ll get the portion of the refund allocated to you based on the income you reported or tax you prepaid. 

If the offset was for unpaid student loans

If the offset was for student loans, you should see a deadline for disputing the offset on the notice. Typically, you have 65 days to dispute. Generally, student loan processors send student loans to the Treasury Offset Program when they are about nine months behind. 

How do tax refund offsets work?

When you owe money to a government agency that participates in the Treasury Offset Program, the agency contacts the Department of the Treasury about the debt. Then, when the IRS processes your tax refund, it checks whether or not you have outstanding liabilities in the offset database. 

If you have an unpaid bill, the Bureau of Fiscal Services (BFS) checks the tax ID number and the name on the bill against the information on your return. If everything matches, the BFS seizes your refund and sends the funds to the agency you owe money to.

Usually, this happens when you’re at least 90 days delinquent, and the agency must also contact you directly about the delinquency.

What about other BFS offsets?

The same process happens with federal payments. Before issuing a federal payment, the government checks the offset database and then seizes the payment as allowed under federal laws.

Example of the refund seizure process

To give you an example, imagine that you haven’t paid $3000 in child support. The child support services agency in your state alerts the BFS. When you file your tax return, it shows a $6000 refund. 

The BFS seizes $3000. Then, the IRS sends you a refund for the remaining amount. Generally, if this happened in error, you must reach out to the child support agency – not the IRS. 

What bills can cause you to lose your tax refund?

The BFS can seize your tax refund if you owe:

• Federal taxes
• State taxes
• Delinquent student loans
• Back child or spousal support
• Unemployment overpayments
• Federal agency non-taxes — for instance, things like small business loans from the government.

What other payments can the BFS seize?

The BFS can also offset the following federal payments:

• Federal wages
• Federal retirement pay
• Contractor or vendor payments from the government
• Federal employee travel advances and reimbursements
• Some federal benefit payments such as Social Security benefits but not Supplemental Security Income.

In some cases, the BFS can offset the entire payment, just as they can offset your entire tax refund. But in other cases, they can only take a portion of the payment. 

What is a state refund offset?

This is when the state seizes your refund to offset your unpaid liabilities. For example, if you have unpaid taxes or child support in Michigan, the Michigan Department of Treasury can seize your state tax refund. 

The rules vary between states, but most states seize your state refund if you have unpaid taxes. If you only have unpaid federal taxes, most states will seize your state tax refund and send it to the IRS. The reverse is also true — if you only have unpaid state taxes, the IRS will keep your federal tax refunds and send them to the state. 

FAQs About Federal Offsets

What does tax refund offset mean?

This is when the government takes your tax refund to cover unpaid taxes or other liabilities to a government agency.

What is a BFS offset?

It’s called a BFS offset because the Bureau of Financial Services (BFS) handles this process.

Will a tax offset delay my refund?

If the offset doesn’t take your entire tax refund, the remaining portion is likely to be delayed. The notice of intent to offset should explain when you’re going to receive the refund.

Will my tax refund be offset for student loans?

Traditionally, the Treasury Offset Program seizes tax refunds (and potentially other federal payments) when you have delinquent federal student loans – if you’re paying on schedule, you will not lose your refund. Contact your student loan servicer if you’re not sure what to expect.

Can a tax refund offset be reversed?

The intent to offset notice should explain how you can dispute or reverse the offset. Usually, once the money is gone, you can’t get it back. However, you may be able to get a refund if you can prove economic hardship or if you qualify for an injured spouse allocation.

Why did the IRS seize my refund when I’m on a payment plan?

Unfortunately, the IRS will seize tax refunds any time you have outstanding tax debt – even if you’re on an approved IRS installment agreement or have your account marked as currently non-collectible. 

Generally, however, your refund will not be seized for other types of government debts if you’re on a payment plan or have made arrangements with the agency you owe money to.

Will the IRS take my tax refund if I qualify for an offer in compromise?

Yes, the IRS will take all refunds through the date the offer in compromise is accepted. For instance, if you received an offer in compromise on May 1, 2025, the IRS will intercept refunds claimed before that date. 

The refund does not reduce the offer amount. However, you can opt to have future refunds applied to your offer if you sign a form and arrange for the IRS to do that. 

Why did the IRS keep my tax refund – I didn’t receive an offset notice?

Offsets are not the only reason the IRS delays sending tax refunds. The IRS may hold your refund if you didn’t file the previous year or if the agency believes that you are the victim of identity theft.

For instance, if you don’t file in 2024 but you file a return for 2025 with a refund, the IRS may hold the refund in case you owe taxes for 2024. 

Save Your Tax Refund – Get Help Today

At the W Tax Group, we can help you deal with a notice of intent to offset and other tax issues. If you’re worried about losing your federal tax refund due to an intent to offset or facing any other tax problems, contact us today. We can help

Lead Tax Attorney at The W Tax Group

Stephen A Weisberg