Irs Student Loan Returns: What You Need To Know

The IRS can take your tax refund if you have defaulted on your student loan payments. However, this only applies to federal student loans, and private student loans are not considered federal debt. If you are delinquent on your federal student loan payments, the IRS, the Department of Education, and the US Treasury can garnish your tax return to offset the delinquent funds. This process is called a student loan tax refund offset. If you are at risk of this happening, you will be notified by mail 60 to 65 days before the offset, and you will be given instructions for contesting it.

The IRS won't take your refund if your student loan is in deferment

If you've defaulted on your student loan, you might be worried about losing your tax refund. While it is true that the IRS can take your refund in this situation, there are certain circumstances where they won't.

Firstly, if your student loan is in deferment, the IRS won't take your refund. Deferment means that you've made an official agreement to postpone your loan payments. In this case, the IRS will not take your refund, and your student loan interest deduction may be lower than in previous years if you paid less interest.

Additionally, if you've defaulted on your federal student loan, you can apply for a tax offset hardship refund through the Treasury Offset Program (TOP). This program offers a one-time opportunity to rehabilitate your loan and stop the IRS from keeping your tax refund. To qualify, you must make at least nine out of ten payments on time and in full from a new payment plan arranged based on your income and expenses. Once you've made your fifth payment, the garnishment order will be suspended.

It's important to note that federal student loans won't go into default status until after nine months of missed payments. If you're delinquent with your student loan payments, federal agencies will notify the TOP after 120 days. Before the IRS garnishes your tax refund, the agency managing your debt must send you a letter informing you of their collection plans. You will then receive a notice from the TOP 60 days before your tax return is garnished.

If you want to dispute a debt or notice from the IRS, you should gather your records and compare the debt amount and repayments to your credit report and payment history. You can also contact your lenders and loan servicers to notify them of any errors in credit reporting, preferably in writing. If your tax return is already being held back, you have the option to appeal the decision.

The IRS will take your refund if you're delinquent with student loan payments

The IRS can take your tax refund if you are delinquent with your student loan payments. The IRS will only take your refund if your student loan is not in deferment and you are delinquent with your payments to offset debt. If your student loan is in deferment, the IRS will not take your refund.

If you are approaching nine months or 270 days of missed payments, your loan could be categorized as in default. In such cases, your federal tax refund could be seized in part or in full. The U.S. Department of Education and the U.S. Treasury can garnish your tax return to offset the delinquent funds.

There are a few things you can do to try to prevent this from happening. You can notify your lenders and loan servicers of any errors in the credit reporting of your student loan in writing. You can also call the Federal Student Aid Department of the U.S. Department of Education's Default Resolution Group (DRG) at 1-800-621-3115. Additionally, you can apply for a tax offset hardship refund through the Treasury Offset Program. This offers loan holders a one-time opportunity to rehabilitate a student loan after it has entered default.

It is important to keep an eye on any updates and actively manage your student loans. The IRS and the U.S. government launched a 12-month on-ramp to repayment to provide relief to borrowers after the COVID-19 three-year payment pause for student loans ended. This program runs from October 2023 through September 2024, during which time borrowers won't fall into default or be penalized for missed payments.

The IRS can take your refund if your student loan is in default status

The IRS can take your tax refund if your student loan is in default status. This is known as a student loan tax refund offset. Federal student loans are considered in default after nine months (270 days) of non-payment. If your loan is in deferment, the IRS will not take your refund.

The Department of Education and the U.S. Treasury can take money from your tax return to offset delinquent funds. The U.S. Department of Education can also seize your tax refund in part or in full if your loan is in default. The IRS will notify you by mail 65 days before the offset, and this notice will include instructions for contesting it. You can also apply for a tax offset hardship refund through the Treasury Offset Program.

To stop the IRS from keeping your tax refund money, you can rehabilitate your student loan by contacting your lender and arranging a monthly payment plan. You must make at least nine out of ten payments from the new payment plan on time and in full. Once you make your fifth payment, the garnishment order must be suspended.

It's important to note that private student loans are not considered federal debt, and they cannot take your tax refund.

The IRS won't take your refund if you're on a 12-month repayment plan

If you're on a 12-month repayment plan, the IRS won't take your refund if your student loan is in deferment. The IRS will only take your refund if you're delinquent with your student loan payments to offset the debt. This means that if you've missed payments and your loan has entered default status, the IRS may keep your tax refund.

Federal student loans won't go into default status until after nine months (270 days) of missed payments. However, federal agencies must notify the Treasury Offset Program (TOP) if a borrower hasn't made a payment in 120 days. Before garnishing your tax refund, the agency managing your debt must send you a letter stating their intention to take your refund. You will then receive a notice from TOP 60 days before your tax return is garnished.

If you're on a 12-month repayment plan, it's important to make timely payments to avoid default status and potential tax refund garnishment. You can also apply for a tax offset hardship refund through TOP to stop the IRS from keeping your refund. This option is available if you can prove financial hardship and can commit to a new monthly payment plan.

Additionally, if you're disputing a debt, you can request your portion of the refund back from the IRS by filing Form 8379. This form allows the IRS to calculate the share of the refund belonging to each spouse in the case of a joint return. It's important to carefully follow the instructions and attach the required forms, including W-2, W-2G, and 1099, to avoid delays in processing your request.

You can dispute a debt to stop the IRS from garnishing your tax return

If you have student loans, you can still receive a tax refund. However, if you default on those loans, your tax refund could be seized in part or in full. The federal StudentAid website explains that tax refund garnishments were paused only through September 30, 2024, which means your next tax return could be at risk.

If you receive a notice of garnishment, you can dispute the debt. The notice will include instructions for contesting the offset. You may be able to do so if:

• You did not take out the loans cited in the notice (i.e., someone fraudulently used your identity to take out student loans).
• You are currently in bankruptcy.
• You have already paid the debt or are not actually in default.

If you are in default, you can bring your loans out of default to avoid garnishment. Options include consolidation, income-driven repayment plans, refinancing, or loan forgiveness.

If you disagree with the garnishment of your tax refund or credit, you can seek legal representation or advice. To release the garnishment, you must provide one of the following court-validated documents:

• MC-51 Order on Objections to Garnishment: The Treasury will only accept this if it releases the full refund amount offset. Partial payments cannot be processed.
• MC-50 Garnishment Release: A garnishment release issued by a circuit or district court requires the Treasury to release a refund offset to the taxpayer.
• MC-17 Certificate of Satisfied Judgment: This form is issued when the debt has been paid in full.

If you cannot afford to pay your tax debt because of your financial condition, you can ask the IRS to temporarily delay collection. You can call the number on the notice or visit your local IRS office. Have a copy of the bill and any tax returns, canceled checks, or other records to help explain why you believe your bill is wrong. If the IRS agrees, they will adjust your account and, if necessary, send a revised bill.

Frequently asked questions