§6402 — Title 26 Internal Revenue Code | U.S. Code

Summary

The IRS can take money you overpaid in taxes and first use it to pay debts you owe, then give back whatever remains. The IRS may apply an overpayment to your past or future federal tax bills, or let you or the IRS apply it to your estimated tax for the next year. If someone else is owed money, the IRS must reduce your refund to pay those debts in a set order: first past-due child or spousal support, then past-due federal agency debts, then past-due State income taxes, and then certain unpaid unemployment-compensation debts. The IRS must tell you when it reduces your refund and must send the money to the agency or State that is owed it. States must follow rules before asking the IRS to take your refund for State tax or unemployment debt. For State income tax offsets, your federal return must show an address in that State, the State must send you certified notice and give you at least 60 days to object, and some limits apply (for example, some State debts older than 10 years do not qualify). There are special steps for Social Security (OASDI) overpayments and for joint tax returns to protect each person’s share. Courts cannot block or review these kinds of IRS reductions, and the IRS cannot review them in an administrative proceeding. The IRS must explain any denial of a refund claim. No refund tied to certain credits can be paid before the 15th day of the second month after the tax year ends. The IRS must issue rules within 6 months after the Taxpayer First Act to fix misdirected electronic refunds. Defined terms (one line each): Federal agency = a U.S. department, agency, instrumentality, or government corporation; covered unemployment-compensation debt = certain final overpayments, unpaid employer contributions, and related penalties/interest; OASDI overpayment = overpaid Social Security (title II) benefits.

Title 26, §6402

Internal Revenue Code — Source: USLM XML via OLRC

(a)In the case of any overpayment, the Secretary, within the applicable period of limitations, may credit the amount of such overpayment, including any interest allowed thereon, against any liability in respect of an internal revenue tax on the part of the person who made the overpayment and shall, subject to subsections (c), (d), (e), and (f), refund any balance to such person.

(b)The Secretary is authorized to prescribe regulations providing for the crediting against the estimated income tax for any taxable year of the amount determined by the taxpayer or the Secretary to be an overpayment of the income tax for a preceding taxable year.

(c)The amount of any overpayment to be refunded to the person making the overpayment shall be reduced by the amount of any past-due support (as defined in section 464(c) of the Social Security Act) owed by that person of which the Secretary has been notified by a State in accordance with section 464 of such Act. The Secretary shall remit the amount by which the overpayment is so reduced to the State collecting such support and notify the person making the overpayment that so much of the overpayment as was necessary to satisfy his obligation for past-due support has been paid to the State. The Secretary shall apply a reduction under this subsection first to an amount certified by the State as past due support under section 464 of the Social Security Act before any other reductions allowed by law. This subsection shall be applied to an overpayment prior to its being credited to a person’s future liability for an internal revenue tax. For purposes of this subsection, any reference to a State shall include a reference to any Indian tribe or tribal organization receiving a grant under section 455(f) of the Social Security Act.

(d)(1)Upon receiving notice from any Federal agency that a named person owes a past-due legally enforceable debt (other than past-due support subject to the provisions of subsection (c)) to such agency, the Secretary shall—

(A)reduce the amount of any overpayment payable to such person by the amount of such debt;

(B)pay the amount by which such overpayment is reduced under subparagraph (A) to such agency; and

(C)notify the person making such overpayment that such overpayment has been reduced by an amount necessary to satisfy such debt.

(2)Any overpayment by a person shall be reduced pursuant to this subsection after such overpayment is reduced pursuant to subsection (c) with respect to past-due support collected pursuant to an assignment under section 408(a)(3) of the Social Security Act (42 U.S.C. 608(a)(3)) and before such overpayment is reduced pursuant to subsections (e) and (f) and before such overpayment is credited to the future liability for tax of such person pursuant to subsection (b). If the Secretary receives notice from a Federal agency or agencies of more than one debt subject to paragraph (1) that is owed by a person to such agency or agencies, any overpayment by such person shall be applied against such debts in the order in which such debts accrued.

(3)(A)Paragraph (1) shall apply with respect to an OASDI overpayment only if the requirements of paragraphs (1) and (2) of section 3720A(f) of title 31, United States Code, are met with respect to such overpayment.

(B)(i)In the case of a debt consisting of an OASDI overpayment, if the Secretary determines upon receipt of the notice referred to in paragraph (1) that the refund from which the reduction described in paragraph (1)(A) would be made is based upon a joint return, the Secretary shall—

(I)notify each taxpayer filing such joint return that the reduction is being made from a refund based upon such return, and

(II)include in such notification a description of the procedures to be followed, in the case of a joint return, to protect the share of the refund which may be payable to another person.

(ii)If the other person filing a joint return with the person owing the OASDI overpayment takes appropriate action to secure his or her proper share of the refund subject to reduction under this subsection, the Secretary shall pay such share to such other person. The Secretary shall deduct the amount of such payment from amounts which are derived from subsequent reductions in refunds under this subsection and are payable to a trust fund referred to in subparagraph (C).

(C)In lieu of payment, pursuant to paragraph (1)(B), of the amount of any reduction under this subsection to the Commissioner of Social Security, the Secretary shall deposit such amount in the Federal Old-Age and Survivors Insurance Trust Fund or the Federal Disability Insurance Trust Fund, whichever is certified to the Secretary as appropriate by the Commissioner of Social Security.

(D)For purposes of this paragraph, the term “OASDI overpayment” means any overpayment of benefits made to an individual under title II of the Social Security Act.

(e)(1)Upon receiving notice from any State that a named person owes a past-due, legally enforceable State income tax obligation to such State, the Secretary shall, under such conditions as may be prescribed by the Secretary—

(A)reduce the amount of any overpayment payable to such person by the amount of such State income tax obligation;

(B)pay the amount by which such overpayment is reduced under subparagraph (A) to such State and notify such State of such person’s name, taxpayer identification number, address, and the amount collected; and

(C)notify the person making such overpayment that the overpayment has been reduced by an amount necessary to satisfy a past-due, legally enforceable State income tax obligation.

(2)Paragraph (1) shall apply to an overpayment by any person for a taxable year only if the address shown on the Federal return for such taxable year of the overpayment is an address within the State seeking the offset.

(3)Any overpayment by a person shall be reduced pursuant to this subsection—

(A)after such overpayment is reduced pursuant to—

(i)subsection (a) with respect to any liability for any internal revenue tax on the part of the person who made the overpayment;

(ii)subsection (c) with respect to past-due support; and

(iii)subsection (d) with respect to any past-due, legally enforceable debt owed to a Federal agency; and

(B)before such overpayment is credited to the future liability for any Federal internal revenue tax of such person pursuant to subsection (b).

(4)No State may take action under this subsection until such State—

(A)notifies by certified mail with return receipt the person owing the past-due State income tax liability that the State proposes to take action pursuant to this section;

(B)gives such person at least 60 days to present evidence that all or part of such liability is not past-due or not legally enforceable;

(C)considers any evidence presented by such person and determines that an amount of such debt is past-due and legally enforceable; and

(D)satisfies such other conditions as the Secretary may prescribe to ensure that the determination made under subparagraph (C) is valid and that the State has made reasonable efforts to obtain payment of such State income tax obligation.

(5)For purposes of this subsection, the term “past-due, legally enforceable State income tax obligation” means a debt—

(A)(i)which resulted from—

(I)a judgment rendered by a court of competent jurisdiction which has determined an amount of State income tax to be due; or

(II)a determination after an administrative hearing which has determined an amount of State income tax to be due; and

(ii)which is no longer subject to judicial review; or

(B)which resulted from a State income tax which has been assessed but not collected, the time for redetermination of which has expired, and which has not been delinquent for more than 10 years.

(6)The Secretary shall issue regulations prescribing the time and manner in which States must submit notices of past-due, legally enforceable State income tax obligations and the necessary information that must be contained in or accompany such notices. The regulations shall specify the types of State income taxes and the minimum amount of debt to which the reduction procedure established by paragraph (1) may be applied. The regulations may require States to pay a fee to reimburse the Secretary for the cost of applying such procedure. Any fee paid to the Secretary pursuant to the preceding sentence shall be used to reimburse appropriations which bore all or part of the cost of applying such procedure.

(7)Any State receiving notice from the Secretary that an erroneous payment has been made to such State under paragraph (1) shall pay promptly to the Secretary, in accordance with such regulations as the Secretary may prescribe, an amount equal to the amount of such erroneous payment (without regard to whether any other amounts payable to such State under such paragraph have been paid to such State).

(f)(1)Upon receiving notice from any State that a named person owes a covered unemployment compensation debt to such State, the Secretary shall, under such conditions as may be prescribed by the Secretary—

(A)reduce the amount of any overpayment payable to such person by the amount of such covered unemployment compensation debt;

(C)notify the person making such overpayment that the overpayment has been reduced by an amount necessary to satisfy a covered unemployment compensation debt.

(2)Any overpayment by a person shall be reduced pursuant to this subsection—

(A)after such overpayment is reduced pursuant to—

(i)subsection (a) with respect to any liability for any internal revenue tax on the part of the person who made the overpayment;

(ii)subsection (c) with respect to past-due support; and

(iii)subsection (d) with respect to any past-due, legally enforceable debt owed to a Federal agency; and

(B)before such overpayment is credited to the future liability for any Federal internal revenue tax of such person pursuant to subsection (b).

(3)No State may take action under this subsection until such State—

(A)notifies the person owing the covered unemployment compensation debt that the State proposes to take action pursuant to this section;

(B)provides such person at least 60 days to present evidence that all or part of such liability is not legally enforceable or is not a covered unemployment compensation debt;

(C)considers any evidence presented by such person and determines that an amount of such debt is legally enforceable and is a covered unemployment compensation debt; and

(4)For purposes of this subsection, the term “covered unemployment compensation debt” means—

(A)a past-due debt for erroneous payment of unemployment compensation due to fraud or the person’s failure to report earnings which has become final under the law of a State certified by the Secretary of Labor pursuant to section 3304 and which remains uncollected;

(B)contributions due to the unemployment fund of a State for which the State has determined the person to be liable and which remain uncollected; and

(C)any penalties and interest assessed on such debt.

(5)(A)The Secretary may issue regulations prescribing the time and manner in which States must submit notices of covered unemployment compensation debt and the necessary information that must be contained in or accompany such notices. The regulations may specify the minimum amount of debt to which the reduction procedure established by paragraph (1) may be applied.

(B)The regulations may require States to pay a fee to the Secretary, which may be deducted from amounts collected, to reimburse the Secretary for the cost of applying such procedure. Any fee paid to the Secretary pursuant to the preceding sentence shall be used to reimburse appropriations which bore all or part of the cost of applying such procedure.

(C)The regulations may include a requirement that States submit notices of covered unemployment compensation debt to the Secretary via the Secretary of Labor in accordance with procedures established by the Secretary of Labor. Such procedures may require States to pay a fee to the Secretary of Labor to reimburse the Secretary of Labor for the costs of applying this subsection. Any such fee shall be established in consultation with the Secretary of the Treasury. Any fee paid to the Secretary of Labor may be deducted from amounts collected and shall be used to reimburse the appropriation account which bore all or part of the cost of applying this subsection.

(6)Any State receiving notice from the Secretary that an erroneous payment has been made to such State under paragraph (1) shall pay promptly to the Secretary, in accordance with such regulations as the Secretary may prescribe, an amount equal to the amount of such erroneous payment (without regard to whether any other amounts payable to such State under such paragraph have been paid to such State).

(g)No court of the United States shall have jurisdiction to hear any action, whether legal or equitable, brought to restrain or review a reduction authorized by subsection (c), (d), (e), or (f). No such reduction shall be subject to review by the Secretary in an administrative proceeding. No action brought against the United States to recover the amount of any such reduction shall be considered to be a suit for refund of tax. This subsection does not preclude any legal, equitable, or administrative action against the Federal agency or State to which the amount of such reduction was paid or any such action against the Commissioner of Social Security which is otherwise available with respect to recoveries of overpayments of benefits under section 204 of the Social Security Act.

(h)For purposes of this section, the term “Federal agency” means a department, agency, or instrumentality of the United States, and includes a Government corporation (as such term is defined in section 103 of title 5, United States Code).

(i)The Secretary may provide that, for purposes of determining interest, the payment of any amount withheld under subsection (c), (e), or (f) to a State shall be treated as a payment to the person or persons making the overpayment.

(j)For procedures relating to agency notification of the Secretary, see section 3721 of title 31, United States Code.

(k)Notwithstanding any other provision of law, in the case of an insolvent corporation which is a member of an affiliated group of corporations filing a consolidated return for any taxable year and which is subject to a statutory or court-appointed fiduciary, the Secretary may by regulation provide that any refund for such taxable year may be paid on behalf of such insolvent corporation to such fiduciary to the extent that the Secretary determines that the refund is attributable to losses or credits of such insolvent corporation.

(l)In the case of a disallowance of a claim for refund, the Secretary shall provide the taxpayer with an explanation for such disallowance.

(m)No credit or refund of an overpayment for a taxable year shall be made to a taxpayer before the 15th day of the second month following the close of such taxable year if a credit is allowed to such taxpayer under section 24 (by reason of subsection (d) thereof) or 32 for such taxable year.

(n)Not later than the date which is 6 months after the date of the enactment of the Taxpayer First Act, the Secretary shall prescribe regulations to establish procedures to allow for—

(1)taxpayers to report instances in which a refund made by the Secretary by electronic funds transfer was not transferred to the account of the taxpayer;

(2)coordination with financial institutions for the purpose of—

(A)identifying the accounts to which transfers described in paragraph (1) were made; and

(B)recovery of the amounts so transferred; and

(3)the refund to be delivered to the correct account of the taxpayer.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Social Security Act, referred to in subsecs. (c), (d)(3)(D), and (g), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Title II of the Act is classified generally to subchapter II (§ 401 et seq.) of chapter 7 of Title 42, The Public Health and Welfare. section 204, 455, and 464 of the Act are classified to section 404, 655, and 664, respectively, of Title 42. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables. The date of the enactment of the Taxpayer First Act, referred to in subsec. (n), is the date of enactment of Pub. L. 116–25, which was approved July 1, 2019.

Amendments

2025—Subsec. (c). Pub. L. 118–258 inserted at end “For purposes of this subsection, any reference to a State shall include a reference to any Indian tribe or tribal organization receiving a grant under section 455(f) of the Social Security Act.” 2019—Subsec. (n). Pub. L. 116–25 added subsec. (n). 2018—Subsec. (a). Pub. L. 115–141, § 401(a)(285), substituted “(f), refund” for “(f) refund”. Subsec. (c). Pub. L. 115–141, § 401(a)(286), substituted “of such Act” for “of of such Act”. Subsec. (d)(2). Pub. L. 115–141, § 401(a)(287), substituted “section 408(a)(3) of the Social Security Act (42 U.S.C. 608(a)(3))” for “section 402(a)(26) of the Social Security Act”. 2015—Subsec. (m). Pub. L. 114–113 added subsec. (m). 2010—Subsec. (f). Pub. L. 111–291, § 801(a)(1), struck out “resulting from fraud” after “debts” in heading. Subsec. (f)(3). Pub. L. 111–291, § 801(a)(2), redesignated par. (4) as (3) and struck out former par. (3). Prior to amendment, text of par. (3) read as follows: “Paragraph (1) shall apply to an overpayment by any person for a taxable year only if the address shown on the Federal return for such taxable year of the overpayment is an address within the State seeking the offset.” Subsec. (f)(3)(A). Pub. L. 111–291, § 801(a)(3)(A), struck out “by certified mail with return receipt” after “notifies”. Subsec. (f)(3)(B). Pub. L. 111–291, § 801(a)(3)(B), substituted “is not a covered unemployment compensation debt” for “due to fraud”. Subsec. (f)(3)(C). Pub. L. 111–312 substituted “is a covered unemployment compensation debt” for “is not a covered unemployment compensation debt”. Pub. L. 111–291, § 801(a)(3)(C), substituted “is not a covered unemployment compensation debt” for “due to fraud”. Subsec. (f)(4). Pub. L. 111–291, § 801(a)(2), redesignated par. (5) as (4). Former par. (4) redesignated (3). Subsec. (f)(4)(A). Pub. L. 111–291, § 801(a)(4)(A), inserted “or the person’s failure to report earnings” after “due to fraud” and struck out “for not more than 10 years” after “remains uncollected”. Subsec. (f)(4)(B). Pub. L. 111–291, § 801(a)(4)(B), struck out “due to fraud” after “to be liable” and “for not more than 10 years” after “remain uncollected”. Subsec. (f)(5) to (8). Pub. L. 111–291, § 801(a)(2), redesignated pars. (5) to (7) as (4) to (6), respectively, and struck out par. (8). Prior to amendment, text of par. (8) read as follows: “This section shall not apply to refunds payable after the date which is 10 years after the date of the enactment of this subsection.” 2008—Subsec. (a). Pub. L. 110–328, § 3(d)(1), substituted “(c), (d), (e), and (f)” for “(c), (d), and (e),”. Subsec. (d)(2). Pub. L. 110–328, § 3(d)(2), substituted “and before such overpayment is reduced pursuant to subsections (e) and (f)” for “and before such overpayment is reduced pursuant to subsection (e)”. Subsec. (e)(3). Pub. L. 110–328, § 3(d)(3), inserted “or subsection (f)” after “paragraph (1)” in concluding provisions. Subsec. (f). Pub. L. 110–328, § 3(a), added subsec. (f). Former subsec. (f) redesignated (g). Subsec. (g). Pub. L. 110–328, § 3(a), (d)(4), redesignated subsec. (f) as (g) and substituted “(c), (d), (e), or (f)” for “(c), (d), or (e)”. Former subsec. (g) redesignated (h). Subsec. (h). Pub. L. 110–328, § 3(a), redesignated subsec. (g) as (h). Former subsec. (h) redesignated (i). Subsec. (i). Pub. L. 110–328, § 3(a), (d)(5), redesignated subsec. (h) as (i) and substituted “subsection (c), (e), or (f)” for “subsection (c) or (e)”. Former subsec. (i) redesignated (j). Subsecs. (j) to (l). Pub. L. 110–328, § 3(a), redesignated subsecs. (i) to (k) as (j) to (l), respectively. 2006—Subsec. (c). Pub. L. 109–171 substituted “of such Act.” for “the Social Security Act.” in first sentence and “The Secretary shall apply a reduction under this subsection first to an amount certified by the State as past due support under section 464 of the Social Security Act before any other reductions allowed by law.” for “A reduction under this subsection shall be applied first to satisfy any past-due support which has been assigned to the State under section 402(a)(26) or 471(a)(17) of the Social Security Act, and shall be applied to satisfy any other past-due support after any other reductions allowed by law (but before a credit against future liability for an internal revenue tax) have been made.” in third sentence. 1998—Subsec. (a). Pub. L. 105–206, § 3711(c)(1), substituted “(c), (d), and (e)” for “(c) and (d)”. Subsec. (d)(2). Pub. L. 105–206, § 3711(c)(2), substituted “and before such overpayment is reduced pursuant to subsection (e) and before such overpayment” for “and before such overpayment”. Subsec. (e). Pub. L. 105–206, § 3711(a), added subsec. (e). Former subsec. (e) redesignated (f). Subsec. (f). Pub. L. 105–206, § 3711(a), (c)(3), redesignated subsec. (e) as (f) and substituted “(c), (d), or (e)” for “(c) or (d)” and “Federal agency or State” for “Federal agency”. Former subsec. (f) redesignated (g). Subsec. (g). Pub. L. 105–206, § 3711(a), redesignated subsec. (f) as (g). Former subsec. (g) redesignated (h). Subsec. (h). Pub. L. 105–206, § 3711(a), (c)(4), redesignated subsec. (g) as (h) and substituted “subsection (c) or (e)” for “subsection (c)”. Former subsec. (h) redesignated (i). Subsec. (i). Pub. L. 105–206, § 3711(a), redesignated subsec. (h) as (i). Former subsec. (i) redesignated (j). Subsec. (j). Pub. L. 105–206, § 3711(a), redesignated subsec. (i) as (j). Former subsec. (j) redesignated (k). Pub. L. 105–206, § 3505(a), added subsec. (j). Subsec. (k). Pub. L. 105–206, § 3711(a), redesignated subsec. (j) as (k). 1997—Subsecs. (a), (e) to (j). Pub. L. 105–33 repealed Pub. L. 104–193, § 110(l)(7). See 1996 Amendment notes below. 1996—Subsec. (a). Pub. L. 104–193, § 110(l)(7)(A), which directed substitution of “(c), (d), and (e)” for “(c) and (d)”, was repealed by Pub. L. 105–33. Subsec. (e). Pub. L. 104–193, § 110(l)(7)(C), which directed amendment by adding subsec. (e), reading as follows: “Collection of Overpayments Under Title IV–A of the Social Security Act.—The amount of any overpayment to be refunded to the person making the overpayment shall be reduced (after reductions pursuant to subsections (c) and (d), but before a credit against future liability for an internal revenue tax) in accordance with section 405(e) of the Social Security Act (concerning recovery of overpayments to individuals under State plans approved under part A of title IV of such Act).”, was repealed by Pub. L. 105–33. Subsec. (f). Pub. L. 104–193, § 110(l)(7)(B), which directed amendment by redesignating subsec. (e) as (f), was repealed by Pub. L. 105–33. Pub. L. 104–134 amended subsec. (f) generally. Prior to amendment, subsec. (f) read as follows: “For purposes of this section, the term ‘Federal agency’ means a department, agency, or instrumentality of the United States (other than an agency subject to section 9 of the Act of May 18, 1933 (48 Stat. 63, chapter 32; 16 U.S.C. 831h)), and includes a Government corporation (as such term is defined in section 103 of title 5, United States Code).” Subsecs. (g) to (j). Pub. L. 104–193, § 110(l)(7)(B), which directed amendment by redesignating subsecs. (f) to (i) as (g) to (j), respectively, was repealed by Pub. L. 105–33. 1994—Subsecs. (d)(3)(C), (e). Pub. L. 103–296 substituted “Commissioner of Social Security” for “Secretary of Health and Human Services” wherever appearing. 1990—Subsec. (d)(1). Pub. L. 101–508, § 5129(c)(1)(A), struck out “any OASDI overpayment and” after “(other than”. Subsec. (d)(3). Pub. L. 101–508, § 5129(c)(1)(B), added par. (3) and struck out former par. (3) which read as follows: “For purposes of this subsection the term ‘OASDI overpayment’ means any overpayment of benefits made to an individual under title II of the Social Security Act.” Subsec. (e). Pub. L. 101–508, § 5129(c)(2), inserted before period at end “or any such action against the Secretary of Health and Human Services which is otherwise available with respect to recoveries of overpayments of benefits under section 204 of the Social Security Act”. 1988—Subsec. (i). Pub. L. 100–647 added subsec. (i). 1984—Subsec. (a). Pub. L. 98–369, § 2653(b)(2), substituted “subsections (c) and (d)” for “subsection (c)”. Subsec. (c). Pub. L. 98–378, § 21(e)(1), substituted “collecting such support” for “to which such support has been assigned” and inserted provision that a reduction under this subsection shall be applied first to satisfy any past-due support which has been assigned to the State under section 402(a)(26) or 471(a)(17) of the Social Security Act, and shall be applied to satisfy any other past-due support after any other reductions allowed by law (but before a credit against future liability for an internal revenue tax) have been made. Subsecs. (d) to (f). Pub. L. 98–369, § 2653(b)(1), added subsecs. (d) to (f). Subsec. (g). Pub. L. 98–378, § 21(e)(2), added subsec. (g). Former subsec. (g) redesignated (h). Pub. L. 98–369, § 2653(b)(1), added subsec. (g). Subsec. (h). Pub. L. 98–378, § 21(e)(2), redesignated former subsec. (g) as (h). 1981—Subsec. (a). Pub. L. 97–35, § 2331(c)(1), inserted reference to subsec. (c) of this section. Subsec. (c). Pub. L. 97–35, § 2331(c)(2), added subsec. (c). 1976—Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing.

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