IRS classifies tax payment as a tax refund
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Dear Tax Talk,
When I filed taxes in 2012, my income was underreported because I used an educational award from a service year with AmeriCorps to pay my student loans. I forgot that award was taxable income and did not receive the 1099-MISC or 1099-INT during tax season because it was sent to my old Virginia address (I live in Massachusetts), so it wasn’t included in my filing. In May 2013, I paid the amount due in full online. On the written form, I signed my acknowledgment and provided the date of payment and confirmation number from the Treasury website.
In July 2013, I received another letter informing me that I still owed on the 2011 tax debt. Through subsequent calls to the IRS, I learned that when I paid the IRS, its system had not updated my file with the owed 2011 tax amount, so it just sat under my name. Then it was reclassified as a “tax refund.” Before the payment was sent back to me, the system did a check and the Bureau of Financial Management Services found another account for non-tax debt, so the payment was offset and sent to this account. My question is in regard to the IRS and its argument that I still owe this money.
To be blunt, I don’t understand how or why I am responsible for repaying it money that it lost due to mistakes with its own system. I understand that “if you have unpaid debts, such as overdue child support, state income tax or student loans, FMS may apply part or all of your tax refund to pay that debt,” and I’m in the midst of contacting FMS to find out what this debt is toward.
However, my issue is that my 2011 tax payment was classified as a refund in the first place. I wasn’t paying that money to myself — I could have kept it in my bank account instead of bringing in the IRS as an intermediary to give me back my money. I’m sorry, even typing that makes no sense and is frustrating. I am also frustrated that even though the IRS mishandled my payment, the onus is on me to speak with another government entity to have those funds returned.
As such, here is where my question comes in: Do you have any direction as to whom I should speak with — title or department — at FMS or how I frame a question such as this? And further, is there a specific department that I should connect with in the IRS over this situation? So far, I’ve spoken with personal/individual account balances. I appreciate your taking the time to read this.
You can contact the Treasury Offset Program Call Center regarding the offset of your federal tax refund at 1 (800) 304-3107.
The Financial Management Service has recently been folded into the Bureau of the Fiscal Service, a bureau of the Department of the Treasury which, among other services, manages the collection of delinquent debt owed to the government.
I understand you are very frustrated at this point, but I feel confident that they will be able to research your account history and assist you in determining what happened to your tax refund and more importantly, why. You may need to be prepared to do some research once you speak to them to straighten out any misinformation they may have on you. This is important, as you do not want this to happen with any future tax refunds.
Once you contact the Bureau of the Fiscal Service, you may want to follow up with the IRS to let it know what is going on, as the IRS will continue to attempt to collect the money it believes you still owe and that can cause you more problems than you want right now.
Thanks for the great question and all the best to you in resolving this issue.
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