Resumption Of Offsetting Refunds Against Old Tax Debts

Some people may be aware that the Internal Revenue Service (IRS) allows taxpayers to offset any current tax refund amounts against outstanding tax debts. However, many taxpayers may not know that this resumption of offsetting refunds against the old tax debts process also resumes once the current tax year ends and tax refunds are issued.

So if you have an old, unresolved tax debt from a previous year, it’s important to factor this into your planning for any potential tax refund in 2019. By understanding how the offsetting process works and planning ahead, you can avoid any surprises and ensure that your refund goes towards your overall financial goals.

Offset refunds will resume against old tax debts

The offsetting of tax refunds against outstanding debt will resume from 1 July 2021, the ATO has announced. The move affects those with an offsettable tax debt dating back to 1 July 2017.

The decision to resume offsetting follows a two-year pause that was introduced as part of the Government’s economic stimulus measures during the COVID-19 pandemic.

During the pause, offsetting of tax refunds against debts owed to the ATO was replaced with a ‘hold’ on the debt, which meant taxpayers would not have to make any repayments until their debt was due for review.

However, offsetting will now resume and taxpayers with offsettable debts will have their refund applied towards their outstanding liability.

How will this work?

offsetting will now resume and taxpayers with offsettable debts will have their refund applied towards their outstanding liability.

This means that if you have a tax debt dating back to 1 July 2017, your offset refund will be applied towards that debt.

If you’re not sure whether you have an offsettable tax debt, you can check your ATO online account or give a call on 13 28 61.

What does offsetting mean for you?

Offset amounts are deducted from your tax refund before it is paid to you. The offset amount is then applied to your outstanding tax liability.

If your offset amount is greater than your tax refund, your refund will be reduced to nil and the full offset amount will be applied to your outstanding tax liability.

If you offset your tax refund, you may end up with a higher tax bill in the future as you will have less money to offset your tax liability.

You can avoid offsetting by making arrangements to pay your outstanding tax debt before your tax return is lodged. If you are unable to pay your debt in full, you can make partial payments or enter into a payment plan with the ATO.

If offsetting does occur, you will be notified in writing and given 28 days to make alternative payment arrangements.

The benefits of this change

Offsetting tax can have many benefits for businesses, including reducing the amount of debt owed, offsetting refunds, and improving tax return compliance. By offsetting tax liabilities, businesses can also reduce their overall tax burden. This change can be beneficial for small businesses in particular, as they often have difficulty complying with tax obligations.

The offsetting of tax refunds or credits can also help businesses to improve their cash flow. Overall, this change can provide significant benefits to businesses by helping them to better manage their tax affairs.

Offsetting tax can also help businesses to improve their bottom line by reducing the amount of tax they owe. This change can be particularly beneficial for businesses that are struggling with debt, as it can help them to reduce their overall debt burden. Offsetting tax can also help businesses to improve their cash flow position by offsetting refunds or credits. This change can be beneficial for businesses of all sizes but is likely to be of particular benefit to small businesses.

If you are a business owner, offsetting tax may be a good option for you to consider to improve your business’s financial situation. It may also be a good option if you are an individual who owes taxes. If you offset your tax liability, you may be able to reduce the amount of tax you owe. offsetting tax can also help you to improve your compliance with tax obligations.

This can be beneficial for businesses and individuals alike. If you are considering offsetting tax, it is essential to speak to a qualified accountant or tax professional to ensure that it is the right option for you.

Offsetting tax can have many benefits, but it is important to understand the implications before making a decision. If you offset tax, you may be required to pay interest on the amount of tax offset. offsetting tax can also have other implications, so it is important to speak to a qualified professional before making a decision. Thank you for taking the time to read this article.

Who is affected by the change?

This change will affect individuals, businesses, and companies that have outstanding tax debt. If you are expecting a refund or credit, it is important to check your account to see if you have any obligations that need to be paid first.

If you have a small business with outstanding tax debts, you may want to consider contacting the ATO to arrange a payment plan. This will ensure that your business can meet its obligations and avoid any further penalties.

The offsetting of refunds or credits will not apply to debts that are on hold, such as certain income tax debts. This change is effective from 1 July 2019 and will apply to all tax liabilities incurred after this date.

If you have any questions about how this change may affect you, please contact the ATO or speak to your accountant.

What to do if you owe money to the IRS?

If you owe money to the IRS, there are a few things you can do to offset your tax debt. You may be able to offset your debt by paying your income tax, business tax debts, or other taxes owed. You can also offset your tax debt by taking advantage of tax refunds or credits. 

Additionally, you may be able to offset your tax debt by consolidating your debts on hold or by setting up a payment plan with the IRS. Finally, if you are a small business owner, you may be able to offset your tax liabilities by June 2022.

No matter what method you choose to offset your debt, it is important to take action and make a plan to pay off your IRS debt as soon as possible.