May 13, 2019 - Douglas Myser

Feds take single mom's tax refund. As she scanned the letters' black type, Alexis Patterson felt herself go numb. "The U.S. Department of Treasury--applied all or part of your payment to delinquent debt that you owe," it read. Patterson stopped reading. One thing mattered now. The single mother would not receive her $3,063 tax refund, including her child tax credit. The government would instead apply the money to her past due student loan account. She and her 11 year old daughter, Ophelia, have been homeless over the last few months in Portland, Oregon. Her refund, she hoped, would help them secure a place to stay. "Everything just fell out from beneath me," Patterson, 47. Feds take single mom's tax refund.

Tax refunds are a lifeline for many people. The average check from the IRS in 2019 so far is $2,795, which represents six weeks of income for the typical family in the U.S., and the largest cash infusion 1 in 3 households will see all year. For the increasing number of people who've fallen behind on their student loan, however, that relief never comes. The U.S. Government has extraordinary collection powers on federal debts and it can seize borrower's tax refunds and earned income and child tax credits, as well as their wages and Social Security.

This year, the U.S. Government has already taken $3.3 billion form 1.4 million student loan borrowers federal tax refunds, compared to $2.3 billion from 1.2 million borrowers in 2016, according to data provided by CNBC by the U.S. Treasury Department. It has also pulled $48.6 million this year from 91,000 borrowers state tax refunds, up from $35.2 million from 70,000 borrowers in 2016.

Borrowers in financial distress can request that the Education Department review, and potentially return, their seized tax refund. However, refunds are harder to get back than Social Security or wage offsets. The Education Department is required to let borrowers know in advance that their tax refund will be taken but many people never see that letter for one reason or another. If you owe back taxes and need help, call this Tax Resolution Company and ask about the IRS Fresh Start Program, but also ask for Tax Relief options not in that particular program.