Can the IRS take my student refund on a old tax debt owed (IN NON COLLECTABLE STATUS).

Asked 10 months ago - Richmond, VA

Im in non collectable status for tax debt of $5000 but i had a payment plan that i contacted the IRS of my inability to fufill any longer. Months has past and I contacted them again and found out about the status which is still in place. Im in school and I had to get Pell Grant and Stafford Loans . I want to know can the IRS tax any student refunds that is due me.

Attorney answers (3)

  1. Maxim Christopher Zawojski

    Contributor Level 11

    4

    Lawyers agree

    Answered . Your "student refund" is the portion of your student loan that the school disburses to you to pay for your living expenses. As such, it is a loan and not income. The IRS can only levy income and assets. In any case, your CNC status would keep them from taking any action. This status, for financial hardship I assume, is subject to periodic review though, so if you start a job you may loose that status with respect to any income you may be earning.

    The information provided here is intended to help you be an informed legal consumer and is not a substitute for... more
  2. Matthew Scott Berkus

    Contributor Level 20

    3

    Lawyers agree

    Answered . Student loan refund is really a misnomer (bad name). The money you get from this "refund" is really just excess loan funds. All it means is that the combination of financial aid and loan funds is more than the cost of attendance. As such, a student has a choice...accept the disbursement or reject it. All things being equal, unless you absolutely NEED the money for living expenses, the excess disbursement should be rejected. The money you get is a student loan.

    Since the "refund" is really a disbursement of loan proceeds, it is not attachable by the IRS.

  3. Robert J. Hoffman

    Pro

    Contributor Level 11

    Answered . The other attorneys are correct with regard to whether the IRS will attempt to take loan 'refunds.'

    I wanted to add that 'Currently Not Collectible' status does not necessarily last forever. If you file tax returns or the IRS receives evidence of income (W-2 or 1099 filings) that would suggest an ability to pay in future years, your account will go back into collections and the IRS will expect some kind of resolution.

    Robert Hoffman is a tax attorney licensed in California. The information presented here is general in nature and... more

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