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Federal return, Federal Restitution and the Federal Tax Offset Program

Brattleboro, VT |
Filed under: Federal crime Tax law

I have Federal Restitution where I am ordered to pay $100/month with no interest and no penalties. I pay my $100 faithfully every month and have done so since 2009. This year, my husband and I received notice that the US attorney was intercepting our refund. Of course the notice came on Friday and no one was available to answer our questions. I have read that the Federal Tax Offset Program can ONLY intercept these funds when one is past due. Is this correct? I am not past due with it - that would be in violation of my Supervised Release. I'm confused as to why this is the only return that was targeted

Attorney Answers 3

Posted

A section of the Internal Revenue Code authorizes the IRS to seize refunds in payments of non-tax debts. Restitution falls into this category. On the one hand, you could argue that this seizure violates the terms of your supervised release which calls for payment of $100 per month. On the other hand, the IRS is not bound by what the judge said in your case. It is something of a world apart. Especially, if the monthly payments will not pay off the total restitution order by the end of your supervised release, the IRS may have the power to seize your refund. You should call the number on your letter to find out why the government is seeking payment above and beyond what is required by your supervised release. In the future, try to minimize any refund. In addition, you and your husband may want to file separate returns, especially if his income is greater than yours.

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Posted

Thank you for your response. It's tought to move forward with your life when things keeping reminding you of the mistake you've made. My husband is going to to call the US Atty office on Monday (the number on the letter) and then he's going to file Injured Spouse and try and recoup what is his. Going forward I think we will file seperately, but I am unsure how to claim on my W2 so it balances out and not making me owe. Thank you again.

Posted

A problem might be with an over focus on the "Federal Tax Offset Program". Treasury has other programs that take tax refunds for other types of debts; do you have another source of debt? such as student loans? The broader "Treasury Offset Program" feeds many other types of creditors.

The big key to prevent this from happening in future is to set your withholding so that you will have just above $0 in your refund each year.

Are you certain it was related to the restitution order?

Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal Specialization PATENTAX.COM This communication is general information and not legal advice, and does not create an attorney-client relationship. This communication should not be relied upon as any type of legal advice. Please note that no attorney-client relationship exists between the sender and the recipient of this message in the absence of either (1) a signed fee contract and (2) remission of an agreed-upon retainer. Absent such an agreement and retainer, I am not engaged by you as an attorney, nor is any other member of my law firm.

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I have no other source of debt and the notice we received in the mail says listed the government agency collecting the debt as the US Atty of Vermont and there is also a TOP trace number on the letter. I'm still confused as to why this is the first year they decided to go after it. I filed taxes in 2009 and 2010 with no issues. I have no idea what to set my withholding at so I don't owe. Is there a formula to follow?

Curtis Lamar Harrington Jr

Curtis Lamar Harrington Jr

Posted

Many people set it in different ways; some use exemptions, some set the withholding amount if you are an employee; If you claim no exemptions on your w-4, they withhold a lot; as you claim more exemptions they withhold less and less money. If you are self employed, you do your own estimated taxes and you control it directly. When you use the govt as a piggy bank, you get NO interest and your refund can be taken. I don't know why so many people use their tax refund in this way.

Curtis Lamar Harrington Jr

Curtis Lamar Harrington Jr

Posted

I do have one more thing to add. There was a change in the law last year concerning the "RESTITUTION ASSESSMENT" program. It meant to cure a hole in the system where some tax evaders were able to pay restitution by court order and yet file for refunds. This new (a little over a year old) program was a change that caused restitution orders to be ASSESSIBLE. So I'm guessing that IF this program is relevant, that it took the total restitution owing and turned it into a TAX ASSESSMENT. I hadn't thought when I read it that it could be used retroactively (like the equivalent to an ex post facto problem), but your possibility has opened my eyes on this possibility. See Restitution assessment: http://www.irs.gov/pub/irs-wd/1105037.pdf

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Posted

What it all boils done to is the IRS can do what the IRS does. My husband is filing form 8379 Injured Spouse and on Monday I will change my filing # from 0 to at least 1, but I still have to ask, does it make more sense to file Married but seperately or should we continue to file jointly and him just filing form 8379. And to answer your question why so many use Uncle Sam as a piggy bank, for myself it's easier than owing them in the end. Much easier. Thank you so much for everything. It truly is appreciated.

Posted

They can take your refund for:

1. Defaulted Student Loans
2. Overpaid Workers Comp
3. Federal Restitution
4. Back Taxes
5. Back child support

They can take your refund if you owe the money. If you owe restition or back taxes, you are on a payment plan based on your ability to pay. If you have a refund, they consider that "extra money."

Christopher Larson
www.insightlawfirm.com
www.insightlawfirm.wordpress.com

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Posted

After speaking with the VT US Atty office, it was discovered that they took the money erroneously. Although I owe restitution, I have a very specific court order that states I pay $100/month, but my bill, if you will, is/was flagged as being behind; this is not correct. I pay each month, on time. I have been removed from the TOP "list" and going forward, this will not happen again. Thank you for your responses, I truly appreciated you all taking the time to answer.

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