Everything You Need to Know About Tax Refund Offset Reversal 2022

Tax refund season is like a holiday season in the United States. People look forward to their returns hitting their bank accounts so they can make major purchases, pay down debt, or stash more in their savings. Retailers run major sales to cater to consumers who suddenly have a little extra to spend and social media is rich with jokes about the tax season approaching.

But what happens if your refund is taken before you even receive it? What happens when you don’t get to participate in that exciting season? Each year, thousands of people in the United States experience exactly that. This is known as an offset – and it can be discouraging and frustrating, to say the least. 

What is Offset and Why Does It Happen?

If you owe certain entities money, you might have your wages garnished. You might also have your tax return seized to offset that. This is where the term “offset” gets its name. 

The process is not one that most people have any say in. You owe money, and when you receive a large sum at once, you risk having it taken. Since tax refunds are well-documented, you have no way to protect those assets, and they are often taken before you even see a cent of the total.

Some reasons why you might have a tax refund offset include: 

• Unpaid state income taxes
• Unpaid federal incomes taxes
• Unrepaid student loans
• Unpaid child support
• Unpaid unemployment compensation, and more

Some of these offsets are handled at the state level, rather than the federal level. Child support arrears, as an example, is handled by the state that you owe this money to.

However, there are some exceptions. Sometimes, extenuating circumstances cause the government to temporarily change the rules surrounding tax refund offset. This is the case currently, as the ongoing pandemic and the resulting financial fallout has caused the federal government to reconsider the legality of refund offsets. This has led to an across-the-board pause in seizure of tax refunds for some types of debt, as well as a greater cause for tax refund offset reversal in 2022.

What to Know About Getting a Tax Refund Offset Reversal in 2022

A lot has changed about the way the federal government – and the IRS, in particular – operate since early 2020. When the coronavirus pandemic hit the United States, leadership began working to offer lifelines to businesses and working Americans who were in financial duress as a result.

One of these lifelines was the changing of how wages and tax refunds were garnished or offset. President Biden has extended the pause on student loan debt collections through May of 2022. This means that those who receive tax refunds during the first part of the year will not be subject to having those refunds seized to offset the cost of their outstanding student loan debts. 

Some other types of debt have also been part of this pause. When the pause was initiated by former President Trump, it included child support arrears and several other types of delinquent debt that consumers might owe to the state or federal government. When it was extended in January and again in December of 2021 by President Biden, it continued to offer a shield to having tax refunds seized for these types of debts. 

This protection is due to expire in May of 2022, so it is important to remember that outstanding debts will still come due. However, this extension gives many consumers time to plan accordingly and sort out their finances or make agreements with agencies to whom they owe money so that they can repay them when their situations improve. 

What Happens if Your Money Was Already Taken?

While the pause is supposed to protect consumers from losing their tax returns due to delinquent debt, there are definitely some exceptions. 

Likewise, there are also some people who have had their refunds offset regardless. Companies or government agencies to whom money is owed might not be fully informed about a consumers’ rights under these moratoriums. Accounting errors can also occur, causing these funds to be seized without lawful cause. 

You are supposed to receive a notice of your tax refund being offset. However, many consumers do not receive this notice on account of moving, no longer receiving mail in the same place, or just being overwhelmed with the amount of mail they are receiving while struggling with debt.

When these things happen, a person may be able to legally request that some or all of their funds be returned to them with a tax refund offset reversal. This is a process that allows a person to petition the agency that seized their funds and ask for them to be returned. 

How to Request a Tax Refund Offset Reversal in 2022

Do you think you might be entitled to this type of reversal? If so, follow these steps:

First, identify who took your refund. Contact that agency’s default resolution group to find out if a mistake was made, as well as what information they would require from you to prove your case. 

Gather and submit that information to the organization and follow up to ensure that they received it. Once they have received your information, you’ll need to wait to find out if your petition is approved. During this time, it may be wise to seek legal counsel, especially if you have reason to believe that your petition will go unheeded.

Get the Guidance You Need for a Tax Refund Offset Reversal in 2022

Still have questions? You are not alone. Many families in South Florida are searching for answers about what they will or will not owe when they receive their tax refunds this year. 

At the Van horn Law Group, we have the legal experience you need to navigate this process. We can help you understand your rights and responsibilities during these extraordinary times – and help you keep more of the money you are entitled to. 

Don’t let tax refund offset reversal in 2022 cause you confusion and stress! Give us a call and let us help you make the most of it!