What is a Federal Tax Intercept?
A Federal Tax Intercept is where the Internal Revenue Service takes what would be your refund and applies it to any federal debt you owe. If you default on your federal student loan, it can cause such a tax intercept to occur. You will not receive a notification specifically notifying you that an intercept is about to happen. However, the possibility of suffering such a tax intercept is often in the list of potential resolutions listed on other delinquency and default notices you received prior to the intercept from your collections company or servicer. You will most probably discover a tax intercept has occurred the hard way…when your tax refund does not show up.
Can a Federal Tax Intercept Be Stopped?
Stopping a Federal Tax Intercept is nearly impossible, but it can be achieved in rare circumstances. Typically, to stop a tax intercept requires a variety of documentation to be submitted which usually causes frustration and confusion. As an attorney familiar with the necessary documents, process and form preparation, I can perform this work and help you to understand the implications of filing them. I can review your federal tax intercept, the cause of the intercept and provide you with the facts and chances of recovery of the intercepted funds or avoiding the intercept prior to you filing.
Will My Spouse Lose their Tax Refund also?
If you file jointly with your spouse and you suffer a Federal Tax Intercept, your spouse does have an option to recover their portion of the intercept by filing an Injured Spouse form with the Internal Revenue Service. If approved, your spouse may recover a portion of the refund amount expected from your original tax return proportional to the tax returns calculations. The IRS is not obligated to agree with the refund amount your tax return suggests for your spouse. However, the IRS usually goes with the amounts calculated directly from your tax return. If you and your spouse do not file taxes jointly, your spouse will typically not lose their refund because of your federal student loans and any federal tax intercept.