Tax refunds can vanish if you have old IRS bills, other debts

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As much as people relish getting a tax refund, many others just dread seeing that money disappear to cover a host of delinquent bills — such as old income tax bills. 

“If you owe the IRS money, they’re obviously not going to issue you a refund without offsetting that first,” said Greg Rosica, tax partner at the EY Private Client Services in New York. “Certainly, the IRS has the first priority.” 

The Treasury’s Bureau of the Fiscal Service also is able to immediately reduce your tax refund for specific past-due debts:

  • State income taxes. 
  • Child support.  
  • Federal agency non-tax debts, including past-due federal student loans.
  • Overpayment of unemployment compensation, say in the case of fraud. 

Overall, the bureau’s program that reduces federal income tax refunds for unpaid debts claimed 4,564,980 in offsets for a total of $5.9 billion from 2018 tax returns filed last year, according to the Treasury’s Bureau of the Fiscal Service. 



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