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What is a tax offset?


Each year, you file a tax return. This is an accounting of your income and expenditures during the year that is required by the federal government.

As part of filing your return, you may find that you are entitled to a refund on your taxes. Maybe the government has charged you too much or there were a greater number of deductions that you deserved that necessitated a refund. You are thrilled to know that you were going to get money back but, when the check comes or it is deposited into your bank, you see that the amount received is less than what you expected, or you did not receive it all. What happened here?


This is the Tax Offset

What may have happened is that your refund was withheld because of what is referred to as a tax offset. If you are unfamiliar with this term, this is a situation where the Department of Revenue has held a portion or all your return because of your failure to pay a certain debt.

According to federal law, there are certain debts that are required for you to pay for you to receive your full tax refund. This could mean you have not paid a debt to a hospital or university. They place a type of hold on your return, giving them the funds you would have received. In other words, the money that was supposed to go to you went to them instead.

This is a very common practice. While it may not seem fair to you, the reasoning is sound. There are debts that you all, and it would be unfair for you to receive a return when you owed money to others. Since some arrangement has not been worked out prior to your filing of your tax return, the federal government simply seizes the money for the value of what is owed, giving you the remainder, if there is any.


What Not to Do if You Have a Tax Offset

If you are aware that you have a tax offset, then you need to recognize that your return is likely going to be held. This leads some to decide that they will try to get around this problem. That if they simply do not file their return right away, deciding to either delay or not file it at all, that they will not have their funds held. The reality is that filing your taxes late is never a good idea. It is to your advantage to make sure that you are filing these documents on time, so that you do not get into some type of legal battle with the government.

The best way to handle your tax offset is to reach out directly to the agency that has placed a hold on your return. You need to be proactive about this. You can’t contact them after your funds have been held and expect them to release the money. They are not going to do that. However, if you are aware of an offset long before you file your tax return, then contact them asking if there is an arrangement that can be made to start paying your money without your taxes being offset.

Be proactive. Avoid having your money taken away from you by getting out in front of this.