An offset can delay your tax return.
Failure to repay a student loan can lead to a federal tax refund offset, which could delay your tax refund check. An offset occurs when a portion of your federal income tax refund is withheld to settle an outstanding federal or state debt, such as student loans or delinquent taxes. The Treasury Offset Program, also known as TOPS, is a federal program administered by the Department of Treasury that collects tax obligations and other delinquent obligations, such as student loan defaults. The Treasury department does not provide a standard time frame in which taxpayers can expect their refund following an offset, as the length in delay is contingent on a few factors.
Student Loan Default
Federal student loans reach default status when a loan holder fails to make payments for 270 days or more, according to the Department of Education. Once an account holder surpasses this point, his loan servicer can submit a request to offset his tax refund to collect on the defaulted federal student loan. Private student loans serviced through third-party companies are not eligible for the TOPS program. However, federal tax returns are still available for garnishment if you default on a private student loan.
Filing Method and Status
The length in delay for receiving a federal tax refund following an offset depends on the method and filing status a taxpayer uses to file his taxes. For example, if a taxpayer files his return electronically, the Department of Treasury processes his offset and issues a refund quicker than if he submitted his tax return through the mail. Additionally, married taxpayers who file jointly and are subject to an offset may experience a longer delay with their tax return than a single taxpayer because the Department of Treasury must obtain the non-obligated spouse's tax information. Non-obligated spouses, also known as injured spouses, are not exempt from offset when a couple files a joint tax return. The non-obligated spouse's tax return also is subject to offset if the obligated spouse's return does not fully cover the required offset amount.
Injured Spouse
Non-obligated spouses can recover their portion of a joint tax return that was offset by the treasury department. An injured spouse must complete a federal Form 8379 to recover her share of the refund, which the IRS computes for her. Allow up to eight weeks to receive you allocation request. The form 8379 is available at the IRS website or a local IRS servicer (see Resources).
Considerations
According to the Department of Education, the amount subject to offset for a student loan includes only the amount of earned income tax credit due to a taxpayer. That is, a taxpayer's tax refund usually is offset no more than the amount he expects to receive for the earned income credit. Taxpayers can check the status of their refund following an offset using the IRS's "Where's My Refund" tool (see Resources).
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