What is a Federal Tax Intercept

A Federal Tax Intercept is when the Internal Revenue Service intercepts any refund you think you might be getting in order to pay off a government debt.  Federal Student Loans are one such government debt that can result in a tax intercept. Often, you will not be notified in advance of the intent. You find out the hard way when you realize you did not receive your refund.  Often, you have received several collection and other notices well in advance indicating a tax intercept is possible.

How Do I Stop A Federal Tax Intercept?

Stopping a Federal Tax Intercept is not an easy thing to do, but it can be done. Most often, it requires several documents to be prepared which can be confusing. A document preparation service can assist with this as well as an accountant or lawyer. In fact, you may need to consult with one or both of them to complete the forms correctly. When using a documentation preparation service, be sure they disclose the price before you tell them what you need. Many services do not. It makes them appear as if they are waiting to find out how much they can get from you. A trustworthy documentation preparation service will disclose their fees and services up front before you tell them anything.

Does My Spouse Lose Tax Refunds as Well?

If you file jointly with your spouse and you suffer a Federal Tax Intercept, your spouse does have an option.  Your spouse can file an Injured Spouse form with the Internal Revenue Service and receive a refund in an amount your tax return justifies as their portion of the refund.  This is somewhat arbitrary as the IRS does not have to agree with the amount you feel your spouse is due.  However, the IRS is most likely to go with the amounts calculated directly from your tax return. If you do not file taxes jointly with your spouse, your spouse will not have their tax refund intercepted due to your federal student loan default.