Common Causes of IRS Offsets and Filing Status Mistakes to Avoid

You've hit on some important points. On March 15th, 2024, the IRS announced they're increasing scrutiny on improper HOH claims specifically. And just last week, on April 2nd, they updated their offset procedures to be more aggressive with unemployment overpayments from 2020-2023. I'm seeing these offsets happen more frequently now than even during the January 30th to February 15th early filing period. Would you agree that the TOP (Treasury Offset Program) seems to be catching up with many filers who might have had issues from previous years?

Your assessment is accurate, but there's another critical dimension to consider. The Bureau of Fiscal Service (BFS) administers the Treasury Offset Program (TOP) which intercepts refunds for specific liabilities. Many taxpayers don't realize that state debts, including unemployment overpayments, can trigger federal offsets. The notification timeline is typically 60-90 days before offset execution, but system backlogs can compress this timeframe to as little as 30 days. If you're expecting a refund and have ANY outstanding government debts, immediate verification of your offset status is essential before the May 17th processing deadline when batch offsets are scheduled.

Man, I learned this the hard way. Had $3200 offset for unemployment I didn't even know I was overpaid on. Apparently I reported some income wrong in 2021 and they just now caught up with me. The kicker? They sent the notice to my old address from 3 years ago. 🙃 Guess I should've updated my address with every government agency that ever existed lol. The worst part is trying to figure out WHICH agency took your money - it's like a fun game of "Who Wants To Be A Millionaire" except the opposite and you don't get any lifelines.

I work with tax issues professionally, and I've been analyzing this exact problem for clients. Here's what I've found works best: 1. First, determine which agency initiated the offset 2. Contact that specific agency to understand the debt details 3. Request documentation of the original debt 4. Verify the statute of limitations hasn't expired 5. If appropriate, file an appeal with supporting documentation The most frustrating part is reaching the right department. Many of my clients were spending 3-4 hours on hold before discovering Claimyr (https://www.claimyr.com). It's a service that navigates IRS phone trees and waits on hold for you, then calls when an agent is available. For offset issues specifically, this saves tremendous time since you often need to speak with multiple departments to resolve the issue completely.

The filing status confusion is particularly problematic, isn't it? Many tax software programs actually guide users toward HOH status without adequately explaining the legal requirements. Did you know that even if you're legally separated but not divorced, you still cannot claim HOH unless you lived apart for the last 6 months of the tax year? And what about the dependent tests? A qualifying child must live with you more than half the year, while a qualifying relative doesn't need to live with you but must have less than $4,700 in income for 2023. The penalties for incorrect filing status can be substantial - up to 20% of the underpaid tax plus interest. Wouldn't it be better if tax software had clearer warnings about these requirements?

Your post is incredibly timely. I just finished reviewing the IRS's latest guidance on their website (https://www.irs.gov/taxtopics/tc203) about offsets yesterday. What's interesting is that even if you've received an offset, you still have rights to dispute it. According to the Treasury Offset Program's documentation, you can request a review even after the offset has occurred, though there are strict timeframes involved. The most challenging aspect seems to be identifying which agency initiated the offset - the BFS (Bureau of Fiscal Service) notice often contains minimal details. For anyone experiencing this, the IRS Tax Offset hotline (800-304-3107) can provide the agency contact information, though prepare for a long wait time.

OMG this post saved me from making a huge mistake! My hubby and I were literally about to file separately w/ me claiming HOH + our kiddo to get max refund (our tax guy suggested it 🙄). After reading this, I checked the actual rules and realized we'd be committing fraud! We redid everything as MFJ yesterday and while our refund is about $1,800 less than what we thought we'd get, at least we won't be looking over our shoulders for the next 3 yrs waiting for the IRS to catch us! Thx for the reality check!

I've been through the offset nightmare back in 2022. They took my entire $4300 refund for a student loan I thought was discharged through a disability program. Turns out the discharge paperwork never went through properly. The frustrating part? I had been receiving letters saying my loans were discharged for TWO YEARS before they suddenly decided they weren't. When I finally got through to someone after calling for days, they admitted it was their error but still kept my money and made me reapply for the discharge program from scratch. The system is completely broken - they make errors, you pay for it, and then you have to jump through endless hoops to fix their mistakes.