Many taxpayers may be anticipating a refund in the near future as the 2025 tax season draws to a close. But it’s crucial to avoid getting ahead of yourself.
The IRS retains the ability to withhold your refund for a number of reasons, in addition to the fact that you are not always automatically eligible for one.
After you complete your taxes, refunds are usually handled rather fast; however, they will be withheld if there are issues related to your debt liability.
Why the IRS processes income tax refunds
After you have overpaid your federal tax liability, you will typically receive a tax refund. For this reason, even if you are an employee whose tax liability is withdrawn from your paycheck each month, it is still imperative that you submit your taxes.
By submitting your taxes, you demonstrate to the Internal Revenue Service (IRS) the difference between your actual tax payment and your actual income-based debt.
Tax credits are another type of tax refund. You pay less in taxes to the government when you receive a tax credit. Two categories of tax credits exist:
Nonrefundable credits can lower your taxes to zero, but they can’t lower them further. No unused credit will be refunded to you.
Refundable credits: You may be eligible for a refund if the credit exceeds your tax liability. The Earned Income Tax Credit (EITC) is one example of this.
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Why your refund might be withheld by the IRS?
Even though you could be eligible for a refund, there are a number of reasons why you might not receive one. This may occur if you have paid your federal taxes but have outstanding state taxes.
You must pay state income tax in 41 of the 50 US states. The IRS will withhold your refund if this is not paid.
Your return can also be withheld if you have fallen behind on a student loan that was provided by the federal government.
Student loan debt to the federal government is little over $1.6 trillion. Your return might be withheld if you have fallen behind on your loan so the government can collect the money you owe them.
You can also be denied your returns if you have unpaid child or spousal support. The state’s child support agency may request that the Treasury Department take money out of the parent’s tax return to make up the deficit if the parent is late on court-ordered child support payments.
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Your return will also be withheld if you have not paid any spousal support that may be due.
How to proceed if your reimbursement has been denied?
Since the Bureau of the Fiscal Service (BFS) of the U.S. Department of the Treasury is responsible for providing IRS refunds, you should get in touch with them first. The following number is where you may reach them: 1-888-826-3127 for BFS.
Depending on the reason your refunds are being withheld, the BFS can help you determine your alternatives and, if necessary, assist you in creating a payment plan.
If the IRS granted you an extension, you just need to file by October 15 of this year, even though the deadline for paying and filing your taxes has already gone.
Make sure all of your bills are paid off before you file, or get in touch with the IRS to arrange a payment plan so that your refunds won’t be withheld when you file later this year.
If you anticipate issues with having to pay off your taxes and bills, always make sure to contact the IRS.
