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Refunds May Be Used to Pay Debt

The State of Iowa may take refunds or payments to suppliers of goods and services to pay debt owed to a State of Iowa agency. In addition, overpayments issued by the State of Iowa may also be collected by reducing payments or refunds. This process is called offsetting refunds or offsetting payments.

Debts that may be offset include:

  • taxes owed the State of Iowa
  • taxes owed the Internal Revenue Service
  • unpaid child support
  • overpayment of unemployment
  • fines owed to counties
  • unpaid college aid loans
  • food stamp overpayment
  • ADC (Aid to Dependent Children) overpayment
  • any other debt owed to a State agency

When a refund or payment is kept by the State to pay debt, a letter is sent to the taxpayer by the agency offsetting the money. For example, when a refund from an individual income tax return is used to pay back child support, the Department of Human Services will send a letter to the taxpayer.

A refund or payment may be taken to pay more than one debt; for instance, if a taxpayer owes College Aid money and also has an unpaid county fine. Each offsetting agency has up to 45 days to process their offset.

If an entire refund or payment is not needed to pay the debt, the remainder will be sent to the taxpayer.

This process may take 45-60 days.