Outstanding Liabilities and Refund Offsets
If a taxpayer and/or spouse owe money to the Arizona Department of Revenue (ADOR) or another agency, the amount may be deducted from an expected refund. ADOR offsets as much of the refund needed to pay off overdue taxes owed by taxpayers and notifies them when this occurs.
Taxpayers who receive a letter from ADOR, informing them that some or all of their refund was adjusted to pay outstanding liabilities with the Internal Revenue Service (IRS), courts, state agencies or government municipalities, should note that, by law, we must offset any refunds or overpayments to certain authorized agencies that have a claim against them.
Those individuals who receive notice can contact the agency listed on the ADOR Offset letter if they have any questions about the claim or offset. If a tax refund has been withheld in error by a court or agency, a taxpayer has 30 days from the date of the letter to file an appeal with the court or agency claiming the refund. The taxpayer will be entitled to the full refund, plus interest and penalties, per Arizona Revised Statute § 42-1122.
Debt Offset Program
Debt Set Off program is a State liability setoff program by which refunds under sections A.R.S. 42-1118 and 43-1072 may be used to satisfy debts that the taxpayer owes to the State of Arizona, a political subdivision, or a court.
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If a taxpayer is due a refund from Arizona but has a tax liability to ADOR, we use the refund to offset ADOR debt before other State liabilities.
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After ADOR, other types of debt that can be paid through the refund include, but are not limited to; child support, municipality fees or bills such as water or waste, state/city courts fines or judgements, community college fees, ambulance etc.
Offsets to non-tax debts occur after ADOR has certified the refunds and before making direct deposits or issuing paper checks.
Refund offsets reduce the amount of the expected direct deposit or paper check and will delay the issuance of the remaining refund (if any) after offset. Taxpayers who owe non-tax debts may contact the agency they owe prior to filing their returns to determine if their debts were submitted for refund offset. ADOR cannot determine, prior to the filing of a return, whether refunds will be offset for non-tax debts.
ADOR sends taxpayers offset notices if any part of their refund is applied to non-tax debts. Taxpayers should contact the agencies identified on the offset notice when offsets occur and they wish to dispute the non-tax debts, or have questions about the offsets.
Treasury Offset Program (TOP)
A program where ADOR and the IRS share information on the debts of a taxpayer with one another so that any refunded tax money may be offset or rerouted to pay a taxpayer's debts first and then the taxpayer, if money remains.
Once a claim is submitted to the IRS, it remains there until paid in full. If the offset is not covered fully by the refund, it will continue the following year until the balance is fully paid.
If a refund was offset by the IRS, a taxpayer must allow 6-8 weeks from the letter for processing. However, the taxpayer should not contact ADOR regarding his or her federal tax. Any questions about the IRS offset must be addressed by the IRS.
IRS Contact Information:
800-829-7650 for Wage and Investment (WI)
800-829-3903 for Small Business/Self Employed (SBSE)
215-516-2004 for International (IN) Taxpayers
Or
Local Taxpayer Advocate (LTA) in Arizona:
4041 N. Central Ave.
Phoenix, AZ 85012-2623
602-636-9500
Note: If additional amounts from this refund are used to pay a debt owed to another government agency, the letter notification will display all agencies that have offset the tax refund for the same tax year.