Posted by The TaxAdvocate Group, LLC

Four Things That Can make the Government Seize Your Tax Refunds

Four Things That Can make the Government Seize Your Tax Refunds

We all have big plans for our tax refunds. It is one of the few things many Americans look forward to. Out of excitement, many people check their mailbox and bank account daily in anticipation of that Golden letter or notification. Sadly, not everyone who qualifies for a tax refund will eventually get the money when they file for their tax

The Bureau of the Fiscal Service (BFS), which is in charge of IRS tax refunds can seize your tax refunds. This often happens when you owe the federal or state agencies money via the U.S. Treasury Department’s Treasury Offset Program (TOP). As a result, if you owe any money, even if you forget, it will hardly slip through the cracks. 

Every year, the Treasury Department’s Treasury Offset Program (TOP) recovers billions of dollars from people that owe. With this, we have come up with four instances where the government can seize your tax refunds.

  1. You have a defaulted Student Loan.

It is easy to get a student loan for college tuition. Many people borrow this and get carried away. They hardly strategize on ways to pay or how long it will take them to make payment. In the last year, 2019, almost 11% of borrowers defaulted on their student loans.

Defaulting on your student loan gives the BFS enough grounds to withhold your tax refund and gear it towards servicing your student loan debt. If you have defaulted on your student loan, bear in mind that the government knows where to get you. Work with your loan holder to come up with a new payment plan, forbearance or deferment. 

  1. You Owe Back Spousal or Child Support

That is right; you cannot owe either child or spousal support and think you can get away scot-free. As a result, if you have defaulted on either of the two, do not spend the money before you have it. Again, the BFS can come in to withdraw some or all of the refund and direct it towards the child or spousal support.

The BFS is known for not joking with child support. Records from the 2017 annual report have it that around $1.8 billion was collected as child support. As a result, if you owe either child or spousal support, you are better off making a plan to pay it via installment payment or enlisting the service of a debt recovery analyst.

  1. You have State and Federal taxes to Pay

If you have back taxes from the previous year – either federal or state taxes- is another license for the BFS to direct your refund to service, the back taxes. The state and federal tax agencies, most times, are so nice that they will send you a reminder about the debts, giving you a chance to refund it. Should you refuse, your tax refund will take the hit. 

With this, you are in a better position to work out how to pay your tax debts. If the federal or state agency reports you to the BFS, you might lose your tax refunds. The BFS will make sure you pay every dime before your refunds start coming to you again.

  1. You owe Unemployment Compensation Debts.

Unemployment insurance compensation money is a relief for many people, but it is not a gift. The state unemployment agency, many times, will send you a notice, reminding you of the debt. You will likely receive many letters to this effect. However, if you fail to honor them and they stop sending you the letters, you are not off the hook yet.

Many at times, the BFS will direct your tax refund to take care of unemployment Compensation Debts you owed. They will give you information on the refunds you qualify for alongside the amount they deduct and the contact information for the state agency that absorbed your refund.  


Many times when people lose their tax refunds, it could be due to an unresolved debt from their past. Do not think you can outsmart the government. You are better off taking care of your debts or the BFS will take care of it with your refunds.

The TaxAdvocate Group, LLC
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