Tax return question: IRS applied refund to husband's $800 shared responsibility payment from 2016 - AZ residents

So I'm in a bit of a weird situation with our taxes this year. We live in Arizona and were expecting a decent refund last year, but never received it. When I checked the IRS website, it just said our return was "applied toward debt due" without much explanation. After calling around and digging through some old notices, I discovered that my husband apparently owes about $800 for a shared responsibility payment from 2016 (he didn't have health insurance for part of that year). I'm guessing this is why we didn't see a penny of our refund last year - it seems the IRS just applied the whole thing toward this old debt. I'm trying to figure out if we need to do anything special when filing this year or if they'll just keep taking our refunds until this debt is paid off. Has anyone dealt with the IRS applying refunds to old shared responsibility payments? Any advice would be super helpful!

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18 comments

Jabari-Jo

•8M

This is actually pretty common and you've already figured out the main issue. When you have outstanding tax debts, the IRS is authorized to keep your refunds and apply them to those debts automatically. This is called a "tax offset." Since your husband's debt is from the shared responsibility payment (the penalty for not having health insurance under the ACA/Obamacare requirements back then), the IRS will continue to offset any refunds until that debt is fully paid. If your refund last year wasn't enough to cover the entire $800, they'll take whatever refund you're due this year as well until it's paid off. The good news is you don't need to do anything special when filing this year - just file normally. If your expected refund this year would completely pay off the remaining balance, any excess will be refunded to you. If you want to know the exact remaining balance, you can request an account transcript from the IRS website or call them directly.

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Jabari-Jo

•8M

Yes, the IRS will automatically send any remaining refund amount after they've taken what's needed to cover the debt. You don't need to contact anyone or take additional steps - it happens automatically in their system. You can absolutely pay off the remaining balance directly instead of waiting for future refunds to cover it. The fastest way is to use the IRS Direct Pay system on their website (no fee for this), or you can use a credit/debit card (though there's a processing fee). Once paid, your future refunds won't be offset. You might want to call the IRS first to confirm the exact remaining balance before making the payment.

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Micah Trail

•8M

After reading your situation, I thought you might benefit from something that helped me with a similar IRS debt situation. I was really confused about how much I actually owed after partial payments and offsets, and the IRS website wasn't clear. I used this tool called taxr.ai (https://taxr.ai) that helped me understand exactly what was happening with my account. It analyzed my IRS notices and tax transcripts and broke everything down in plain English. It showed me that I had partial payments applied from previous refunds and exactly how much I still owed. The best part was I could see all the penalties and interest that had accumulated over time on my old healthcare penalty too.

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Micah Trail

•8M

You do upload your tax documents, but they use bank-level encryption for security, and they don't store your personal information any longer than needed for the analysis. I felt comfortable with it after reading their privacy policy. It doesn't necessarily get information that isn't on the IRS website, but it translates all that technical IRS language and scattered information into something easy to understand. Instead of trying to piece together details from different IRS notices and transcripts, it puts everything in one place with clear explanations. When I called the IRS, I was on hold for over an hour, and the agent wasn't very helpful in explaining how my previous payments had been applied.

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Alberto Souchard

•8M

I just wanted to update after trying taxr.ai that the previous commenter mentioned. It was actually really helpful for my situation with some old tax debts. I uploaded my IRS notices and tax transcripts, and it showed me exactly where my previous year's refund went and how much of my shared responsibility payment was still outstanding. The breakdown was much clearer than anything I got from the IRS website. It even showed me that a payment I made 2 years ago wasn't properly applied to my account! I was able to call the IRS with this specific information and got it fixed. Now I know exactly how much I still owe and can decide whether to pay it off directly or just let them take it from this year's refund. Definitely worth checking out if you're confused about IRS debt situations.

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Katherine Shultz

•8M

If you're still having trouble getting clear answers about your husband's shared responsibility payment, I'd recommend using Claimyr (https://claimyr.com). I was in a similar situation where the IRS kept offsetting my refunds for an old debt, but I couldn't get specific information about how much I still owed. I tried calling the IRS directly multiple times but kept hitting dead ends with hours on hold. Then I found Claimyr, which gets you connected to an actual IRS agent usually within 15 minutes instead of waiting for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They basically navigate the phone system for you and call you back once they have an agent on the line.

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Katherine Shultz

•8M

It doesn't actually jump you ahead in the queue. They use technology to navigate the complicated IRS phone tree and wait on hold for you. When they finally get through to an agent, they call you and connect you directly to that agent. You're still waiting your turn, but they're doing the waiting instead of you. They're definitely legitimate. They don't ask for any tax details or personal information beyond your phone number to call you back. When you get connected, you're speaking directly with an actual IRS agent, not someone from Claimyr. I was skeptical too, but I verified I was speaking with the real IRS by checking the phone number and asking the agent verification questions only the IRS would know about my account.

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Hailey O'Leary

•8M

I need to apologize for my skeptical comment earlier. I actually tried Claimyr after my frustration reached a breaking point with trying to reach the IRS about my own offset refund situation. I was completely wrong about it being a scam. The service works exactly as described. They called me back in about 20 minutes and connected me directly to an IRS representative. I was able to get detailed information about my outstanding balance and even set up a payment plan instead of having my refunds offset each year. The IRS agent confirmed exactly how much I still owed and gave me options I didn't know existed. For anyone dealing with refund offsets or trying to figure out exactly what you owe the IRS, being able to actually speak with someone makes a huge difference. I wasted days trying to get through on my own before this.

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Cedric Chung

•8M

We had something similar happen a few years back. If you want to avoid having your refund taken again this year, you might want to adjust your withholding so you don't overpay throughout the year. That way, you won't have a refund for them to take! My husband and I changed our W-4s after this happened to us, and now we either break even or owe a small amount at tax time. Then we just make a payment for exactly what we owe. This gave us more money in our paychecks throughout the year AND prevented the IRS from automatically taking a big chunk for past debts. We set up a payment plan for the old debt instead.

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Cedric Chung

•8M

You're right to be concerned about that! You do need to be careful not to underwithhold too much. The general rule is you need to pay at least 90% of your current year tax liability OR 100% of last year's tax liability (110% if your income is over $150,000) through withholding and estimated payments to avoid underpayment penalties. What we did was calculate it pretty closely so we'd either get a very small refund or owe just a little bit. This way we avoided the penalties while also preventing large refunds that would be automatically applied to old debts. It takes a bit more planning, but the IRS has a good withholding calculator on their website that helps make sure you're still meeting the requirements.

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Jabari-Jo

•8M

Yes, the standard 10-year statute of limitations for IRS collections does apply to shared responsibility payments. The clock starts ticking from the date the tax was assessed, not the tax year itself. So if the assessment happened in 2017 for a 2016 tax issue, the IRS would have until 2027 to collect. Keep in mind that certain actions can extend this timeline, like if the taxpayer requests a payment plan or submits an offer in compromise. But barring any extensions, the IRS generally has 10 years to collect on this type of debt.

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