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Federal return, Federal Restitution and the Federal Tax Offset Program

Brattleboro, VT |
Filed under: Federal crime

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

  1. 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.

  2. 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.

  3. 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

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