Americans should be mindful that the federal government can seize their tax returns this year, especially since the deadline is April 15.
Many debt carriers are now paying the price since the government can keep seizing refunds forever, thanks to an upgrade to TOP in 2008. The old regulation stipulated that tax refunds may only be confiscated within ten years of the tax return’s submission.
Many look forward to getting their tax returns because they may use them to pay off debt, put more money away, or buy something nice.
Many Americans, however, will have their tax returns withheld by the Treasury Offset Program (TOP) because they still owe money. Debts such as state and federal tax bills, school loans, and child support payments are examples of this kind of debt.
The initiative was instrumental in seizing over $3.8 billion in federal and state outstanding bills in the preceding year.
If your debt falls within the program’s purview, you should have received a letter alerting you that you are making payments more than 60 days past due. Your ability to obtain future tax refunds may be blocked if your outstanding balance is not settled within 120 days after the due date.
Once you have settled all of your outstanding debts, such as unpaid federal or state income taxes, child support, unemployment insurance, or defaulted student loans, the TOP will stop withholding from your future tax benefits. This does not cover mortgages, credit card debt, or vehicle loans.
Unfortunately, TOP takes a significant chunk of many Americans’ Social Security income, even though the program only takes 15%.
The best way to avoid these problems is to be proactive and watchful when managing your debt.
Despite the TOP’s longevity, many have voiced their displeasure with the lack of advance notice when perks like refunds are eliminated.
