2015
Yes, the federal government can take your tax refund
Student Loan Lawyer / 0 Comments /Many student loan borrowers are surprised to find out that the federal government can take their tax refunds when they are in default. Unfortunately, it is true that the federal government has this immense power. Set forth below is a description of the salient aspects of tax refund offsets. One should consult with counsel for advice in this regard for further explanation and detail.
The process is relatively straightforward. The Department of Education shares computer data with the Treasury Department, which indicates who is in default on student loans. The Treasury Department then compares that data to its own information regarding which citizens are requesting tax refunds.
Once the folks whose refunds are going to be taken are identified, the government sends a notice of the intended offset to the borrower. That notice will state that the borrower has the right to inspect and copy any records relevant to the offset.
Unfortunately, financial hardship on the part of the borrower is not a defense to the intended offset. The Department of Education and/or a guaranty agency, if applicable, will use their discretion and refrain from an intended offset if persuaded there is real financial hardship. However, this is not a mandatory requirement, and therefore, a borrower must be realistic regarding his or her ability to avoid the offset given financial circumstances they face.
Also unfortunate is the fact that simply making payments on the debt after you receive a notice of intended offset is not enough to fend off the government from taking your tax refund. The only way to do this is to enter into a formal repayment agreement, to pay the debt in full, or through compromise, rehabilitation, consolidation or discharge.
A borrower may request a hearing before the offset, however, it is not readily apparent that borrowers have much success in this regard unless there is clear evidence that the debt is not owed or has been miscalculated by the government. Similarly, challenges can be made post-offset, however, there is only success in this regard if there is a complete defense to the debt, such as that they amount is not really owed, bankrupcty was filed before the offset, and some other technical legal defenses of which counsel can advise you.
Finally, the only real way to avoid an offset if there is in fact student loan debt owing is to minimize or eliminate the overpayment of taxes in the first place such that the government has nothing to offset against.
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