TAX SOLUTIONS 13-10: Tax Refund was Seized
Sunday, June 1, 2014

By  A.J. Gross, C.P.A., E.A.

2013 taxes are done and you expected a tax refund.   You checked your bank account for the bank deposit.  You checked your mailbox for a check.  No refund.  What is going on?  You finally receive a letter from the IRS or State.  Your tax refund was seized.

It’s difficult to get your tax refund back after your refund is seized to pay outstanding debt.  If the tax refund is seized due to an error, then you do have a good case to get your refund back. There are procedures to request the return of your tax refund when an error has occurred.

The Treasury Department’s Offset Program will take part or all of your IRS tax refund to pay outstanding debits.  The debts include child support, student loan, state income tax or unemployment compensation.  The Offset Program will not take your IRS tax refund for any other debts such as credit card or medical debt.  You can stop a federal agency from taking your future IRS tax refunds.  You must contact the federal agency that issued the seizure and set up arrangements to pay the outstanding debt.  For example, contact the U.S. Department of Education for unpaid student loans.

The IRS and state have the authority to seize your tax refund for unpaid taxes.  The IRS and state will continue to take your tax refund until all back taxes are fully paid.

Michigan tax refunds are treated differently compared to IRS refunds.  Your Michigan tax refund can be garnished by creditors.  Creditors can’t garnish your IRS tax refund.  Creditors may include credit card companies, hospitals, banks, mortgage lenders or any company with a repayment agreement.  Creditors must file a Request and Writ for Garnishment with the court to garnish your state tax refund.  You must receive a copy of the Garnishee Disclosure and copy of writ from the creditor.  You may be able to stop the garnishment if you file an objection with the court within 14 days of receiving the writ.

My next article will review how to get your tax refund when you don’t have outstanding debt but your spouse does.

IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.

A.J. Gross, C.P.A., E.A. is President of ALG Tax Solutions. A.J. Gross can be contacted at AJGross@algtaxsolutions.
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