Understanding the Treasury Offset Program and Why Your Tax Refund Can Disappear Overnight

Every year, millions of taxpayers expect a refund—only to discover that all or part of their refund has been taken before it ever reaches their bank account. The culprit is the Treasury Offset Program (TOP), a federal system that intercepts refunds to pay certain outstanding debts.

If you’ve ever asked, “Why did my refund get taken?” or “Who can take my federal refund?”, this guide breaks down exactly how refund offsets work, which debts qualify, and how to protect your refund next tax season.

What Is the Treasury Offset Program?

The Treasury Offset Program (TOP) is operated by the U.S. Department of the Treasury’s Bureau of the Fiscal Service. Its purpose is simple:

To collect overdue federal and state debts by offsetting (intercepting) federal payments—including tax refunds.

TOP is legally allowed to use your federal refund to pay certain debts before the IRS releases a dime to you.

What Types of Debts Can Trigger a Tax Refund Offset?

Not all debts can take your tax refund. Only specific federal and state obligations are eligible.

Here are the most common reasons taxpayers lose refunds through TOP:

1. Past-Due Child Support

One of the top reasons for refund offsets.
If you owe overdue child support payments, your refund can be intercepted until the balance is paid.

2. Defaulted Federal Student Loans

If you stopped paying your federal student loans, the Department of Education can request an offset.

This applies to:

• Subsidized loans
• Unsubsidized loans
• PLUS loans
• Consolidated federal loans

Private loans cannot take your refund.

3. Unpaid State Income Tax

States can seize your federal refund to cover:

• State tax balances
• Penalties
• Interest

4. Unemployment Overpayments

If you were overpaid unemployment benefits—especially due to fraud or documentation issues—the state can intercept your refund.

5. Federal Non-Tax Debts

These include:

• VA overpayments
• Federal housing debts
• SNAP or food assistance overpayments
• SBA loan defaults
• Federal grant repayment obligations

6. Federal Court-Ordered Debts

Certain criminal or civil penalties can trigger offsets.

What Debts Cannot Offset Your Refund?

Many people assume any unpaid bill can seize a refund, but that is not true.

TOP does not collect for:

• Medical bills
• Credit cards
• Car loans
• Rent or mortgage payments
• Bank overdrafts
• Private student loans
• Collections unrelated to state or federal agencies

Only government-authorized debts can be offset.

How Do You Know If Your Refund Was Taken?

If your refund is offset, the Treasury will mail a Notice of Offset explaining:

• Which agency collected the money
• How much was taken
• The remaining balance
• Agency contact information

This happens after the offset—not before.
Meaning you may not find out until your refund is already gone.

How Refund Offsets Appear in IRS Tools

On Where’s My Refund

WMR often shows:

• “Your refund has been applied to past due obligations”
• “Your refund was reduced to pay a debt”
• A smaller refund amount than expected

On Your Transcript

Look for:

• TC 898 – Refund applied to offset
• TC 846 – Refund issued (lower amount)
• TC 971 – Notice issued (offset notice)

TC 898 is usually the clearest sign of an offset event.

Can You Prevent a Tax Refund Offset?

Yes—if you take action early.

1. Check Your Debts Before Filing

Use the Treasury Offset Program phone system:

TOP Call Center: 800-304-3107

This tool tells you whether your SSN is flagged for offset.

2. Set Up Payment Plans

Agencies often remove offset requests if you enter a repayment plan.

3. Resolve Identity Mix-Ups

Offsets sometimes happen due to:

• Wrong SSN
• Old debts incorrectly assigned
• Misreported overpayments

Disputing these early helps prevent refund interception.

4. File Injured Spouse Relief (Form 8379)

If your spouse’s debt is causing the offset, you may be entitled to your portion of the refund.

Use this if:

• You filed jointly
• The offset is tied to your spouse’s debt only

This form must be attached to your return or filed after the offset.

What To Do If Your Refund Was Already Taken

1. Call the agency that received the money

The agency name and phone number appear on your offset notice, not the IRS.

2. Request a balance update

Offsets continue until the debt is paid in full.

3. Ask about hardship programs

Some agencies offer hardship waivers or deferments.

4. File Injured Spouse if applicable

This can restore part or all of your refund.

How Much of Your Refund Can Be Taken?

The Treasury Offset Program can take:

• A portion of your refund
• Your entire refund
• Multiple years of refunds until the debt is fully paid

There is no minimum the government must leave you.

The Treasury Offset Program is one of the biggest reasons taxpayers lose refunds each year. If you owe certain government-related debts—such as past-due child support, defaulted federal student loans, unpaid state taxes, or unemployment overpayments—your refund can be intercepted without warning.

To avoid surprise offsets:

• Check your status before filing
• Resolve debts early
• Understand transcript codes like TC 898
• Use Injured Spouse Relief when appropriate

Knowing how TOP works helps you protect your refund and plan ahead for the 2026 tax season.