When you file your federal return, you expect a refund. But sometimes the government applies that refund toward debts you owe instead. That’s called a refund offset. This guide explains how offsets work, when they occur, how to check if one affected you, and what you can do next.

How Refund Offsets Work

• The government uses the Treasury Offset Program (TOP) to intercept refunds and pay debts you owe.
• This step happens after the IRS accepts your return but before your refund is delivered.
• If an offset happens, you’ll receive a notice. That letter will include your original refund, the part taken, and what agency got the funds.

What Debts Can Trigger an Offset

• Past-due federal or state income taxes
• Child support arrears
• Defaulted federal student loans
• Unemployment compensation overpayments or state UI debts
• Other federal agency non-tax debts (HUD, SBA, etc.)

Why Gbooks (or Any Tax Software) Can’t Predict an Offset

Offsets occur in the background — after your return is accepted and handed to refund processing systems. Gbooks doesn’t have real-time access to the debt database the government uses, so we can’t see or warn you of an offset before it happens.

How to Check if a Refund Offset Happened

• Call the TOP hot-line: 1-800-304-3107. The automated system can tell you if your SSN is flagged.
• Review your IRS transcript: Look for transaction codes — especially TC 898 (offset to non-IRS debt) or TC 810 (refund freeze).
• Check your mail: You should get a notice explaining the offset — original refund, amount taken, agency contact.
• Contact the agency: Use the contact info in the notice to dispute or pay the underlying debt.

How to Avoid or Minimize an Offset

• Before you file, check whether you owe state tax, student loans, or UI debts and resolve them if possible.
• If you file a joint return but only one spouse owes the debt, file Form 8379 (Injured Spouse Allocation) so the non-liable spouse recovers their share.
• In rare hardship cases, you might request an Offset Bypass Refund (OBR) to prevent part of your refund from being taken.
• Negotiate payment plans or settlements with agencies ahead of tax season to reduce offset risk.

What to Do If You Believe an Offset Is Incorrect

• Contact the agency that got the funds and dispute the debt. Provide proof if you believe you already paid or it’s not your obligation.
• For student loan offsets, you often have a limited window (e.g. 60–65 days) to challenge it.
• If offsets show discrepancies between the notice and your return, you can call the IRS and the Taxpayer Advocate Service for help.

Common Offset / Transcript Codes

Version: 2025-10-13 · Audience: Members · Category: Taxes → Refund Offsets & Holds