If you’ve just filed your taxes and were expecting to receive a nice refund in the mail then you may be shocked to find out that your check is no longer coming once you check your tax refund status. Whether or not you believe it, there are several scenarios in which the IRS has the right to take your refund. Before you begin to blame the government for your missing money or cry foul on a mistake, look at some of the most common reasons as to why a tax fund would be seized in order to see if any of them apply to you. Here are four main reasons why the IRS would take your refund.
You Have Tax Debt
If you have any amount of outstanding tax debt, the IRS has the right to take your refund and put it towards the old debt that you owe, and they can do this without notifying you beforehand. It doesn’t matter if you owed the debt last year or from twenty years ago, the IRS keeps meticulous past records, and will take hold of the funds that you owe to the state and federal government. If you fall behind on your state tax bill then keep in mind that the state government has the right to either ask the IRS to seize your federal refund or can seize your state fund or both.
You Owe Money For Child Support
The federal government will take note if you start falling behind on paying your child support. In fact, state and federal agencies have the right to put a levy on your refund in order to aid you in paying your outstanding child support debt. Don’t make the error of thinking that you can get away scotch-free once your daughter or son reaches eighteen years old. If you have been delinquent with your payments then it can continue even after your child no longer qualifies to obtain child support.
You’ve Declared Bankruptcy
Paying off your debt can be a very savvy way of using your tax refund money, and so if you are currently handling a bankruptcy situation, your trustee might decide this is the best decision for your finances. Under Chapter 13 bankruptcy, the trustee can request that a court seizes your refund and applies it to all of your debts. If you file a Chapter 7 bankruptcy then you may lose your refund all together, however you may be exempt from some situations of seizure. Once your bankruptcy has been completely discharged, your refunds will be safe from the hands of the IRS. If you think that this may occur with you then it is best to discuss it with your bankruptcy trustee.
You Default on Student Loans
One of the reasons that student loans have much lower interest rate than other types of loans is the fact that they are almost impossible to get away from. Once you become old enough, the government is even allowed to take out money from your Social Security check in order to pay for them. Due to this, it shouldn’t be a far stretch to discover that the IRS is permitted to give your refund to the Department of Education in order to pay for any student loans that you’ve defaulted on.
Situations That Your Refund Won’t Be Seized For
You may be happy to find out that there are plenty of financial situations in which your refund will not be seized for. This includes if you have mortgage or credit card debt, as only the federal government can take your tax refund and not a credit company. Collection agencies will also not be allowed to take away your refund or increase your tax debt. Lastly, a bank overage or overdrawn checking account will not warrant a seizure, as your bank is unable to take away your refund.