- IRS rules require that any overpayment of tax be applied to federal debt owed before the taxpayer is issued a refund. If you owe tax, the amount you owe will be deducted from your refund and applied to what you owe, and the remainder will then be sent to you. In addition to tax debts, the IRS can also apply your refund to federal non-tax debts such as delinquent child support or student loans. If you owe back tax and non-tax debt, then the IRS will deduct the amount to be applied to the outstanding tax debt before applying the refund to non-tax debt. In other words, the IRS debt is primary and other non-tax debts are secondary.
- An installment agreement allows you to pay the tax you owe by making monthly payments. Unfortunately, initiating an installment agreement does not prevent the IRS from taking your refund and applying it to the tax owed.
- If you file a joint return then you and your spouse are responsible, both jointly and separately, for any past or present IRS debt. For instance, if your husband owes federal tax from before you were married, then the IRS can take the tax owed from your joint refund and apply it to your husband's debt. However, you can generally recover your portion of the refund by filing form 8379, Injured Spouse Allocation. If the IRS approves your request, it will refund your portion of the refund and only apply your husband's portion to the debt. The time frame for processing form 8379 is 11 weeks if filed electronically with the return or 14 weeks if filed by mail. Form 8379 can be downloaded at the IRS website or ordered by calling 800-TAX-FORM.
- For assistance, call the IRS at 800-829-1040. An IRS customer service representative can advise you as to whether you owe tax and whether your refund is set to be offset to pay the tax owed.
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