Like a good American citizen, you went through the trying process of filing your taxes. You checked all the boxes, uploaded the forms and found out that you're getting a refund. It's a significant relief to think you may get yourself out of a financial hole. Then, the IRS rips the rug out from under you and says they are seizing your refund.
If this sounds familiar, you're in good company. Most importantly, you have options. Learn how to ensure that you get to keep your money.
When Might the IRS Keep Your Refund?
If you owe back taxes to the IRS, you're far from alone. Americans owe back taxes totaling over $450 billion. When one such person files taxes and receives a refund, the IRS can seize the refund to pay down the debt. Even if you are current on your taxes, the federal government can seize your return if you have defaulted on your student loans. Another reason the IRS may take your tax return is if you owe child support.
The IRS Hardship Request
If you can prove to the IRS that you need that money to make ends meet, you may qualify for financial hardship, which is technically called "Currently Not Collectible" status. To be eligible for this status, you must show the IRS that if they took this money, you would not be able to feed your family, go to your job, continue school or carry out some other vital function.
First, Get a Tax Advocate
To get the IRS to classify you as Currently Not Collectible, you should first fill out what's known as Form 911, which you can obtain on the IRS website. This form helps you gain access to a taxpayer advocate. Fill out the form and deliver it to your local taxpayer advocate office, either in person or via fax. In about two business days, a case officer will contact you to help you get started.
As you work through this process, be sure to keep in close touch with your advocate. His job is to guide you through the IRS bureaucracy. Be sure to follow any steps he asks you to do to get timely service.
Prepare and File Form 433-A
One of the things your tax advocate will ask you to do is to fill out and file form 433-A. This form is where you prove that you are genuinely in financial hardship. Remember that the IRS may not consider some expenses necessary, even if you do. For example, the agency sometimes does not count credit card payments as essential expenses.
Take the time to fill it out completely. Consider every expense you need for your life, including gas for your commute, groceries and more. If you get approved for Currently Not Collectible status, you may have up to 10 years. Be sure to ask your advocate how long this status will remain in place for you.
- TaxDebtHelp: IRS Hardship Requirements to Qualify for IRS Uncollectible Status
- Credit.com: Help! My Tax Refund Was Taken to Pay My Student Loan Debt
- Taxpayer Advocate Service - Currently Not Collectible
- Government Executive: Uncollected Taxes Now Total $458 Billion, IRS Estimates
- Money Crashers: 4 Reasons the IRS Can Seize Your Income Tax Refund Money for Debt
Mackenzie Maxwell believes that a well-made budget is a key to a happy household. She starting combining this interest with her passion for writing in 2016. Mackenzie has written for financial sites like The Balance and local financing organizations.