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Offsetting Refunds

Are you still waiting on your refund? If you owe certain types of debts, you may not get it.

This is called “offsetting refunds.” The Iowa Department of Revenue says the State of Iowa can use the refund to pay for certain types of debts.

Those types of debts are:

  • Taxes owed to the State of Iowa

  • Taxes owed to the Internal Revenue Service

  • Unpaid child support

  • Overpayment of unemployment

  • Fines owed to counties

  • Unpaid college aid loans

  • Food stamp / SNAP overpayment

  • FIP overpayment

  • Any other debt owed to an Iowa state or municipal agency

If the state keeps the refund to pay off a taxpayer’s debt, that agency that is collecting the funds will notify the taxpayer through a letter. For example, a taxpayer who owes child support will receive a letter from the Department of Human Services explaining that the refund was used to pay back the owed child support.

A refund can also be used to pay back more than one debt. The IRS says each agency has up to 45 days to process the offset.

However, if the debt was less than the refund amount, the rest of the refund will be sent to the taxpayer. If the taxpayer signed up for a direct deposit that leftover amount will be refunded through the direct deposit. This could take an extra 30 days to get to the taxpayer once it is released by the offsetting agency.

We will be taking a break next week for Memorial Day and will be back with a new edition on June 2nd. Have a great holiday weekend!

Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein

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