Category: 📂 Taxes Made Simple → Arizona Tax Compliance

📬 What Is a Tax Refund Offset?

If you received a notice from the Arizona Department of Revenue (ADOR) stating that all or part of your tax refund was used to pay off a debt, you're not alone. This process is called a tax refund offset, and it's required by Arizona law.

ADOR is legally required to apply refunds or overpayments toward any verified debt owed to:

• 🧾 Arizona Department of Revenue (ADOR)
• 🏛️ Courts or child support agencies
• 🏙️ State and municipal agencies (e.g., water bills, parking tickets)
• 💼 The IRS through the Treasury Offset Program (TOP)

⚖️ The Arizona Debt Setoff Program

Arizona’s Debt Setoff Program allows ADOR to apply your state refund to any outstanding liabilities you owe. Refunds are first used to pay off debts owed directly to ADOR. After that, they may be used to satisfy debts owed to:

• 💼 Internal Revenue Service (IRS)
• 👨‍👩‍👧‍👦 Child support agencies
• 🏢 State/city agencies or municipalities
• 🏛️ State or local courts

Once the offset is made, the remainder of your refund (if any) is sent via check or direct deposit. This process can delay the timing of your refund.

🔄 How the Process Works

1. ADOR reviews your refund and checks for any debts.
2. If a match is found, the refund (or a portion of it) is sent to the agency you owe.
3. You receive a letter from ADOR explaining the offset and which agency was paid.
4. If you still have refund left, it will be issued to you via check or deposit—after the offset is complete.

Important: ADOR cannot confirm whether your refund will be offset before you file your return. If you think you may owe money to another agency, contact them directly before filing.

🧾 If You're on a Payment Plan

Being on a payment plan with ADOR doesn’t stop refund offsets. If you’re due a state or federal refund while on a payment plan:

• ADOR can apply your refund to your balance
• This does not count as your monthly payment—you still need to pay as scheduled

Using your refund toward the debt may reduce your total balance or even pay off your plan early, but it does not replace your required monthly payments.

👩‍⚖️ Your Rights and What You Can Do

If you disagree with a refund offset:

• Review the ADOR letter carefully—it will list the agency that received the payment
• Contact that agency directly to ask about the debt or dispute the amount
• Under Arizona law (A.R.S. § 42-1122), you have 30 days from the date on the letter to dispute the offset with the agency involved

If the offset is found to be in error, you are entitled to a refund plus interest and penalties.

🔁 Treasury Offset Program (TOP)

The Treasury Offset Program is a federal system that allows Arizona and the IRS to share information about debts. If you owe federal or state debts, your IRS refund may be intercepted by ADOR—or vice versa.

Offsets through TOP can continue for multiple years until the full debt is repaid.

Processing time: If your IRS refund was offset by Arizona, allow 6–8 weeks after receiving your notice for processing.

🔍 Still Waiting on Your Refund?

If your refund is taking longer than expected, check your status using:

• 🔎 ADOR's “Where’s My Refund” Tool
• 💻 IRS Refund Status Tool (federal refunds)

📚 Related Articles

• 📄 Why You Need to Sign Arizona Form 285
• 📝 How to Fill Out Arizona Form 285
• 🔐 Why Setting Up Your IRS.gov Account Matters