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 I am reading more information from the Internet and professional publications regarding this capability of the U. S. Government, including the Internal Revenue Service. The program is the Treasury Offset Program (TOP) which is administered by the Bureau of the Fiscal Services Debt Management Services (DMS).
The Treasury Offset Program is a centralized offset program, administered by the The Bureau of the Fiscal Service’s Debt Management Services (DMS), to collect delinquent debts owed to federal agencies and states (including past-due child support), in accordance with 26 U.S.C. § 6402(d)
(collection of debts owed to federal agencies), 31 U.S.C. § 3720A (reduction of tax refund by amount of the debts), and other applicable laws.
How Does It Work?
Fiscal Service disburses federal payments, such as federal tax refunds, for agencies making federal payments (known as “payment agencies”), such as the Internal Revenue Service. “Creditor agencies,” such as the Department of Education, submit delinquent debts to the Fiscal Service for collection and inclusion in TOP and certify that such debts qualify for collection by offset (the reduction or withholding of a payment).
Payment agencies prepare and certify payment vouchers to Fiscal Service and disbursing officials at other federal agencies that are non-Treasury disbursed (such as the Department of Defense), who then disburse payments. The payment vouchers contain information about the payment including the name and Tax Identification Number (TIN) of the recipient.
Before an eligible federal payment is disbursed to a payee, disbursing officials compare the payment information with debtor information, which has been supplied by the creditor agency, in Fiscal Service’s delinquent debtor database. If the payee’s name and TIN match the name and TIN of a debtor, the disbursing official offsets (withholds) the payment, in whole or in part, to satisfy the debt, to the extent legally allowed.
Fiscal Service transmits amounts collected through offset to the appropriate creditor agencies. Fiscal Service maintains information about the delinquent debt in the TOP delinquent debtor database and continues to offset eligible federal payments until the creditor agency suspends or terminates debt collection or offset activity for the debt.
A creditor agency will suspend collection if the debt is subject to a bankruptcy stay or if other reasons justify suspension. A creditor agency will terminate collection of a debt if it is paid in full, compromised, discharged, or if other reasons justify termination.
Therefore, your tax refund will be reduced by any delinquent or unpaid debts to other Federal agencies:
Unpaid Debt Can Affect Your Refund
If you owe a debt that’s past-due, it can reduce your federal tax refund. The Treasury Department’s Offset Program can use all or part of your refund to pay outstanding federal or state debt.
Here are five facts to know about tax refunds and ‘offsets.’
1.  The Bureau of Fiscal Service runs the Treasury Offset Program.
2.  Debts such as past due child support, student loan, state income tax or unemployment compensation may reduce your refund. BFS may use part or all of your tax refund to pay the debt.
3.  You’ll receive a notice if BFS offsets your refund to pay your debt. The notice will list the original refund and offset amounts. It will also include the agency that received the offset payment and their contact information.
4.  If you believe you don’t owe the debt or you want to dispute it, contact the agency that received the offset. You should not contact the IRS or BFS.
5.  If you filed a joint tax return, you may be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund, file Form 8379, Injured Spouse Allocation.
You can get forms on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Additional IRS Resources:
- Tax Topic 203 – Refund Offsets
IRS YouTube Videos:
- When Will I Get My Refund? – English | Spanish | ASL
- How to Use the Where’s My Refund? Tool – English | Spanish | ASL
IRS Podcasts:
- When Will I Get My Refund? – English | Spanish
- How to Use the Where’s My Refund? Tool – English | Spanish