I Defaulted On An Sba Loan And They Just Took My Tax Refund Why Wasnt I Notified In Advance[yoast-breadcrumb]
I Defaulted On An SBA Loan And They Just Took My Tax Refund Why Wasnt I Notified In Advance
Having your tax refund suddenly taken by the government can be an incredibly stressful and confusing situation. Many people rely on their refunds to help cover expenses or pay down debt. So when that money doesn’t arrive as expected, it can throw everything off.
In your case, it seems the seizure of your refund was related to defaulting on a Small Business Administration (SBA) loan. Unfortunately, you were not given advance warning or notice that this would occur. That lack of communication has likely left you feeling blindsided and scrambling to understand what happened.
Why The Government Can Take Your Refund for Unpaid Debt
The right of the government to take tax refunds for unpaid debts is enabled by something called the Treasury Offset Program (TOP). Under TOP, if someone owes past-due child support, federal debts, state income tax obligations, unemployment compensation debt, or other types of debt to a government agency, their tax refund can be seized and applied to the debt.
Defaulting on an SBA loan falls into the category of federal debt owed. So by failing to make payments on your SBA loan as required, you became subject to TOP and eligible to have your refund confiscated.
Key Things to Know About Tax Refund Offsets:
- Federal agencies, states, and debt collectors must notify the IRS of debts owed.
- The IRS is required to notify you if your refund will be taken.
- Only past-due, legally enforceable debts can trigger an offset.
- The amount taken can include any interest, penalties, collection fees, etc.
Based on the rules, you should have received advance warning from either the IRS or SBA that your refund was at risk of being seized. The fact that this didn’t happen suggests there may have been a breakdown in communication somewhere along the way.
Strategies to Recover Your Confiscated Refund
When a refund is taken without proper notice, it may be possible to get the money returned. Here are some strategies that could help you recover your seized refund:
File an IRS Form 843 Claim for Refund:
This form allows you to request a return of funds that were improperly withheld. On the form, you’ll explain why the offset should not have occurred. Make sure to provide documents that support your claim.
Contact the SBA Loan Servicer:
Get in touch with whoever is servicing your loan and explain that your refund was taken without notice. Ask them to release or return the seized amount. Be polite but firm that proper procedures were not followed.
Submit a Request to the Treasury Offset Program:
You can contact TOP directly and submit documentation showing you did not get the required pre-offset notice. Ask them to refund the amount due to improper procedures.
Seek Legal Assistance:
Consulting with a lawyer can help determine if you have grounds to fight the seizure. An attorney can also handle contacting the IRS or SBA on your behalf. Having a lawyer advocate for return of the refund may carry more weight.
|Strategy||How to Pursue|
|File IRS Form 843||Download form from IRS site and mail in with supporting documents|
|Contact SBA Servicer||Look up loan servicer contact info on SBA site or loan documents|
|Submit Request to TOP||Find contact info at https://fiscal.treasury.gov/top/contact.html|
|Seek Legal Help||Search sites like Avvo.com to find consumer protection attorneys|
Pursuing multiple avenues simultaneously can increase your chances of getting your refund returned. The key is acting quickly and having documentation that shows proper process was not followed.
Avoid Future Refund Confiscation
Getting your refund back is important. But it’s also wise to take steps to prevent this situation in the future:
- Set up IRS account online to access notices about refund offsets
- Update your address/contact info with the IRS and loan servicer
- Seek loan rehabilitation or consolidation options if struggling to repay
- Consult a credit counselor or attorney about debt payoff strategies
Learning from this experience can help you get on a more stable financial footing moving forward. Be sure to address any underlying issues, like high debt levels, that could jeopardize future refunds.
Having your tax refund seized without warning is a stressful and troubling event. But by acting promptly and persistently, you may be able to recover the confiscated funds. Be sure to follow up diligently and get the professional help needed to assert your rights. With a strategic approach, you can potentially get your money back and avoid repeat issues down the road.