Treasury Offset: Why Your Tax Refund Was Smaller and What to Do
Your tax refund arrived smaller than the return said it would be, or it didn't arrive at all, and a letter from the Bureau of the Fiscal Service says the money went to pay a debt. That's a Treasury offset. It's automatic, it's legal when the debt is valid, and the office that took the money usually can't give it back. What you can do depends on who the debt belongs to and whether it's really owed. Here's how to find out and what to do next.
AT A GLANCE
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Two kinds of reduced refunds
Not every smaller refund is an offset. The IRS says the most common reason is an adjustment to your return: a math error, a credit or deduction you didn't qualify for, federal tax you still owed for an earlier year, or estimated tax you underpaid. In that case the IRS mails its own notice explaining the change.
An offset is different. The Bureau of the Fiscal Service, the Treasury office that sends IRS refunds, runs TOP. When it takes part of a refund for a debt, it mails you a notice showing:
the original refund amount,
the amount taken, and
the agency that received the money, with its address and phone number.
The IRS doesn't get the details of the offset. It says to contact the IRS only if the refund amount on the Fiscal Service notice differs from the refund on your return.
TOP staff cannot discuss your debt with you, refund any amounts collected, or discuss payment options with you. (Bureau of the Fiscal Service, FAQs for the Public)
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How a debt gets to TOP
TOP is a matching system. Federal and state agencies send in information about overdue debts, including the debtor's taxpayer identification number, which for most people is a Social Security number. Before a federal payment goes out, it's checked against that database. If the name and number match and the payment is a type that can be offset, TOP reduces the payment, up to the full debt, and sends the money to the agency that's owed. Anything left goes to you.
The rules require several steps before that happens:
Step | What the rules say |
|---|---|
The debt must be valid | The agency must find the debt valid and legally enforceable. Debts in bankruptcy, forbearance or under appeal don't qualify. |
A warning letter first | The agency must write to you at least 60 days before sending the debt to TOP. |
What the letter must say | What the debt is for, how much you owe, that the agency plans to collect by offset, and your rights to review records, dispute, or set up a repayment plan |
When federal debts are sent | Federal agencies must refer nontax debts once they're 120 days overdue. |
Minimum amount | $25 or more |
The 60-day letter is the one many people miss, often because it went to an old address. The agency sends it to the name and address it has on file for the debt.
Which debts can take a tax refund
The Fiscal Service fact sheet says a federal tax refund can be offset by up to 100% for:
federal nontax debts, such as a defaulted federal student loan or a benefit overpayment,
past-due child support,
state income tax debts, and
state unemployment insurance debts.
Past-due federal tax works a little differently. The IRS can levy payments through TOP to collect a federal tax debt under separate legal authority, and the law generally bars the Fiscal Service from telling you that a tax debt was the reason. If you think you owe federal tax, the Fiscal Service says to call the IRS at 800-829-1040.
Other payments TOP can reduce
Refunds aren't the only target. Depending on the debt, TOP can also reduce some Social Security benefits, Railroad Retirement benefits (except Tier 2), federal salaries and federal retirement pay. Supplemental Security Income can't be offset.
Payment | Share that can be taken, per the fact sheet |
|---|---|
Federal tax refund | Up to 100% for federal nontax debts, child support, state income tax and unemployment debts |
Social Security and Railroad Retirement benefits | Up to 15% for federal tax and nontax debts |
Federal salary | Up to 15% of disposable pay for federal debts; 50% to 65% for child support |
OPM retirement | Up to 25% for federal nontax debts; 15% for federal tax debts |
For recurring payments such as monthly benefits, TOP may send a warning letter before the first offset.
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What to do now
IF YOUR REFUND WAS OFFSET
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If you don't think you owe it
Contact the agency named on the notice. The Fiscal Service says that if your debt was already paid in full, or you never owed it, the agency that sent the debt is responsible for returning any money that shouldn't have been taken.
If the debt was referred by a federal agency to the Fiscal Service's Cross-Servicing program, which collects overdue nontax debts for other agencies, you can dispute it directly with that program:
By phone: a debt recovery analyst at 888-826-3127.
By mail: a letter explaining why you don't owe the debt or why the amount is wrong, with copies of proof (such as a payment record), to U.S. Department of the Treasury, P.O. Box 830794, Birmingham, AL 35283-0794. Fiscal Service also offers a Debtor Dispute Form.
Proof: you can ask an analyst for proof that you owe the debt. They'll get the documents from the agency and send them to you.
Cross-Servicing then asks the referring agency to review your dispute. If the agency says there was an error, it fixes it. If it says the debt is valid, collection continues. Keep copies of everything you send.
If the debt is real but you can't pay it all
TOP itself can't accept payments. To stop future offsets, you have to resolve the debt with the agency or program that referred it. For Cross-Servicing debts, an analyst at 888-826-3127 can discuss an installment agreement, and you may be asked for a financial statement, proof of expenses and recent tax returns. If you can never pay the full amount, you can ask about a compromise.
Two cautions from the Fiscal Service FAQ. First, interest, penalties and collection costs generally keep adding up, so the balance can grow while you wait. Second, a payment plan doesn't automatically stop offsets. Agencies are generally required to keep collecting through offset once a debt is delinquent, so ask the analyst whether your refund will still be taken while you pay. If part of a debt is forgiven in a compromise, the Fiscal Service may report it to the IRS on a Form 1099-C, and it may count as income.
You stay in the TOP database until the agency that referred the debt tells TOP to stop, for example because it's been paid, because of a bankruptcy stay, or for another reason that justifies pausing collection. If you've filed for bankruptcy and the automatic stay applies, tell the agency right away.
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By type of debt
Debt | Who to contact |
|---|---|
Defaulted federal student loan | Education Department's Default Resolution Group, 1-800-621-3115 (Mon–Fri 8 a.m.–10 p.m. ET, Sat 8 a.m.–7 p.m. ET), or MyEdDebt.ed.gov |
Past-due child support | Your state or local child support office |
State income tax or unemployment overpayment | The state agency on the notice |
Other federal agency debt | The agency on the notice, or Cross-Servicing at 888-826-3127 |
Federal tax | IRS, 800-829-1040 |
Child support. The Fiscal Service says it can't help you stop, reduce or manage child support. Offsets continue until you no longer owe. Only your state child support office can work with you on the debt. If you lost income, ask that office about changing the order, since the offset collects what the order says is owed.
There can be a lag of two weeks or more between an offset and the agency getting the money. For child support, the Fiscal Service sends the money to the federal Office of Child Support Services, which sends it to the states. If a parent is waiting on a payment, the state child support office can ask HHS about it.
Student loans. If you have questions about a federal student loan, you can also contact your loan servicer or the Federal Student Aid Information Center at 1-800-433-3243. The Education Department's Default Resolution Group handles loans already in default.
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If it was your spouse's debt
When you file jointly and the refund is taken for a debt that's only your spouse's, the money isn't lost for good. The Fiscal Service points injured spouses to IRS Form 8379, which you can download or order by calling 800-829-3676. If you've already filed Form 8379 and your share was still taken, the Fiscal Service says to call the IRS at 800-829-1040. Our injured spouse guide covers the form line by line.
Related guides
Official sources
Last checked: October 30, 2026. Facts come from the Bureau of the Fiscal Service's TOP pages, public FAQs, program-rules fact sheet, Cross-Servicing debtor FAQs, child support and student loan pages, and IRS Tax Topic 203.
This is general information, not legal advice. Whether a debt can be offset, and how much, depends on the debt and the payment. The agency named on your notice has the final word on your account.
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