A tax refund interception is the act of an agency responsible for sending tax refunds using all or part of a refund to fulfill an obligation of the taxpayer rather than sending the money to the taxpayer him/herself. Such provisions exist within the laws of some governments to force a taxpayer to pay off certain types of debt.
Some common obligations for which tax refunds are intercepted include outstanding taxes, student loans, child support, fines, restitution, and wage garnishments. While taxes are sometimes intercepted to pay off the balance to a government-operated collection agency, most places do not allow refunds to be intercepted to pay a private collection agency.
In the United States, the Internal Revenue Service (IRS) allowed federal tax refunds to be intercepted to pay off obligations to a U.S. state if that state has reported that obligation to the federal agency.
In 2008, nearly $2 billion of tax rebate funds from the Economic Stimulus Act of 2008 were confiscated to pay off back taxes, child support, or student loans[1].
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