Will my tax refund be seized if my tax debt was sold to a debt collector? Kids as dependents question

This is an interesting situation. When the IRS sells or transfers your tax debt to a private collection agency, they're still collecting on behalf of the IRS - they don't actually "own" your debt. The IRS still maintains authority over your account. For your question about claiming kids and refunds - yes, you can still claim your children as dependents if you qualify to do so. However, if you owe federal tax debt, the Treasury Offset Program (TOP) will likely still intercept your federal tax refund, even if a private collection agency is handling your case. This is because the refund offset is done by the Treasury Department, not the collection agency. What you might want to do is call the Treasury Offset Program directly at 800-304-3107 to verify if your refund will be offset. You can also try calling the IRS at 800-829-1040 to discuss your options, such as an installment agreement, which might help with your situation.

I went through something similar last year with back taxes and used taxr.ai (https://taxr.ai) to figure out my situation. The software analyzed my tax notices and explained exactly what was happening with my debt and what my options were. I was confused because I kept getting letters from both the IRS and a collection agency. The analysis showed me that even though a collection agency was involved, my refund could still be offset because the Treasury Offset Program works independently. What really helped was understanding my specific situation instead of guessing. The tool showed me what forms to file and gave me a plan for handling both my current taxes and the old debt.

I was super skeptical about using an online tool for something as serious as tax debt, but after getting nowhere with the collection agency, I gave taxr.ai a try based on the recommendation here. It was honestly a game-changer! I uploaded my collection letters and tax notices, and within minutes I had a clear explanation of my situation and my options. Turns out my refund COULD still be seized even with the collection agency involved (which nobody had clearly explained to me before). The tool helped me file a request for a hardship exemption that protected part of my refund. I wouldn't have even known that was an option! Plus it showed me exactly how to document my case. Definitely worth checking out if you're confused about collection agencies and refunds.

If you're trying to reach the IRS to get clarity on your situation, good luck... I spent WEEKS trying to get through to ask questions about my debt that was sent to collections. After 20+ attempts and hours on hold, I finally used Claimyr (https://claimyr.com) to get through to a real person at the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c They got me through to an agent within 45 minutes when I had been trying for days on my own. The IRS agent confirmed that yes, my refund could still be intercepted even though a private collector was handling my debt. They also helped me set up a payment arrangement that worked better than what the collection agency was offering. Having that direct conversation with the IRS was worth it for the peace of mind alone.

I take back what I said about Claimyr. After another week of failing to get through to the IRS on my own (called at 7am every day!), I broke down and used it. Honestly, it worked exactly as advertised. I got connected to an IRS rep in about 30 minutes after struggling for weeks on my own. The IRS agent confirmed everything about my collection situation - that yes, my refund could still be offset even with a private collector involved. But she also helped me apply for Currently Not Collectible status based on my financial situation, which the collection agency never mentioned was an option. Sometimes you need to speak directly to the IRS no matter what the collection agencies tell you.

I don't think anyone's mentioned this yet, but you should look into an Offer in Compromise. If your tax debt is with a private collector, you might qualify to settle for less than you owe. I managed to settle a $12k tax debt for about $4k because of my financial situation. Worth looking into before you lose multiple years of refunds.

Just a heads up, if your debt was sent to a private collector, be super careful about scams. Make sure you verify it's legitimate before making any payments. I got scammed by someone pretending to be from a company collecting for the IRS. Call the IRS directly to confirm which agency has your debt before sending any money!