Why Was My Tax Refund Taken? Refund Offsets and Past-Due Debts

Your refund was probably applied to a past-due debt, a process called a refund offset (sometimes called a treasury offset).

When a refund is due, the government can check whether you owe certain other debts.  If you do, the refund can be reduced or used up to pay them before any money reaches you.  The rest, if any, is sent as usual.  Many people learn about it only when the deposit is smaller than expected or never arrives.

You should receive a notice explaining the offset, the amount and which agency received the money.  Keep it.  It lists a phone number to call about the debt itself, and that is where questions about how the debt was created must go.

Yes, the Alabama Department of Revenue can also apply a state refund to certain debts, and its rules are separate from the federal ones.

A federal offset comes from a federal refund, and a state offset comes from your Alabama refund.  They are separate.  If you are unsure which refund was reduced, look at the notice and the amount that arrived.  The My Alabama Taxes online service and our My Alabama page point you to the right place to check on a state refund or bill.

Alabama has its own rules on which debts qualify, and we check how they apply.  If the amount changed and you are still waiting for other money, see our guides on checking your refund status and why a refund is delayed.

The only real way to stop future offsets is to deal with the underlying debt, since the offset follows the debt.

Contact the agency that received the money, confirm the balance and ask how it can be resolved.  Some debts can be put into a payment arrangement, and others may be disputed if there is an error.  If the debt is a tax debt, see tax debt help in Alabama and IRS payment plans.

Do not ignore any letter.  Keep copies.  Be careful about scams: the IRS first contacts people by mail, and you should never send Social Security numbers or documents through our website.  Bring them to the office or call us.