So, you’ve recently filed your income tax refund and expected to get a massive refund check. Unfortunately, you find out that the refund check you planned to use for other things isn’t coming back anymore. In other words, your tax refund got seized. Why did this happen? Well, for a lot of reasons, actually.
Tax refund seizure happens more often than you realize, and mostly because the IRS believes in paying themselves first for anything that you owe. Either way, here are a couple of reasons the IRS has seized your income tax refund:
1. You’re behind on Your Tax Payments
One of the biggest reasons why the IRS will seize your income tax refund is because you owe taxes. In other words, when you fail to pay your taxes on time, the IRS will take your income tax refund if they can. Of course, they need to make the request first and serve you with a payment notice first before they can do it.
If you don’t pay your taxes within a specified amount of time, your tax refund gets seized and applied to your outstanding tax balance. Depending on how much you owe and your tax refund, the IRS is likely to take up to 100% of your tax refund.
2. You Owe Back Child Support
If you have a child support debt, you’re likely to have your income tax refund seized as well. The IRS is required to seize your income tax refund and apply it towards your outstanding child support debt.
That being said, the courts actually have to order the IRS to deduct the amount of your income tax refund, which you owe on your child support debt. After that, the IRS will take the amount directly from your income tax refund and apply it towards your child support debt.
3. You Haven’t Paid Your Federal Debts
If you have any federal debts, you may find that your income tax refund gets seized if you don’t pay them off. The IRS will withhold a certain percentage of your income tax refunds and apply it towards your outstanding federal debts.
You may have a more difficult time repaying the debt if your income tax refunds is seized, but then again, you can’t just ignore paying off your federal debts either. If you don’t pay your federal debts, the IRS will eventually seize your income tax refunds, which makes things worse for you. So, don’t ignore your federal debts and pay them off before the IRS has to take action.
4. You Have Unpaid Amounts in Your State Unemployment Fund
If you’ve failed to pay your state unemployment fund, you may find that your income tax refunds gets seized as well. Keep in mind that this only applies to certain states, so make sure to check if it applies to yours.
For example, the state of Indiana will seize your income tax refunds if you owe money in your state unemployment fund. However, if you file your state income tax return and you owe money in your state unemployment fund, you’ll be notified of it, and the court may allow you to pay it off within a certain amount of time, thereby preventing your income tax refunds from being seized.
Conclusion
As you can see, if you have debts such as federal debts or child support you owe, you can’t simply ignore them and expect to get away with them. The IRS will seize your income tax refunds. So, if you want to enjoy that fat tax refund check at the end of your fiscal year, always be sure to stay on top of your debts. Of course, not all debts count, such as your credit card debt, but staying on top of debts nevertheless is a good thing to ensure you never run into financial challenges you cannot overcome.
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