The government can go through your federal refund to collect if you owe money to other government agencies. The most common cases involve court-ordered financial payments associated with a former marriage (e.g., delinquent child or spousal support payments) or unpaid student loans.
The IRS will even make sure it gets prior federal tax debts that you didn't clear.
Even taxpayers who have a payment arrangement in place with the IRS could encounter refund issues. The agreement with the IRS says it can apply any refund you have against what you owe.
Self-correcting your mistakes
In a worst-case scenario, you might not even get a refund.
"You'll get a letter telling you to refile," says Scharin.
You also should refile your return and refigure your tax bill and any refund if you find a mistake that the IRS overlooked in processing. If the IRS does eventually notice the error, you'll face penalties and interest on the amount you didn't properly pay on time.
In these cases, file an amended return, Form 1040X, and send the original, incorrect refund check back to the agency. If the money was directly deposited, use it to pay your correct tax due.
Since you cannot e-file Form 1040X, the IRS says to include a letter of explanation with the returned check or corrected payment amount. The agency will issue you a refund for the proper amount when it processes your amended return.
When sending back an actual check, on the back where you normally would endorse it, write "void." Send the check and your letter detailing why you're sending back the check. Be sure to include your name, Social Security number, mailing address and a daytime telephone number in case an agent needs to follow up with you.
Send the check back to the issuing center; you'll find that location on the front of the check. Before you drop it in the mail, make a copy of the check and your letter for your files. It's a good idea to send the material with a return receipt for additional verification for your records.