The Treasury Offset Program (TOP) is used to offset federal income tax refunds, tax credits, or any other federal payment program to pay off certain outstanding debts owed by taxpayers. This process is governed by federal law.
When the federal government makes a payment to you, such as a tax refund or social security payment, it can withhold some or all of that money. This is a measure to get back the overdue debt you owe, such as defaulted federal student loans.
This act of withholding money to collect on an overdue debt is called an administrative offset or offsetting the payment.
The good news: If you have credit cards, car loans, or mortgages that are behind, your lenders can’t reach out to the TOP to get their money back. Federal offsets can only be used for loans or debts that are owed to the government.
The types of debts that can fall under the Treasury Offset Program include:
Like it or not, the Treasury Offset Program helps the government recoup some or all of the money they lent out to borrowers who don’t pay. Tax refund offsets are sometimes necessary to prevent the government from losing the money they lend.