Federal Tax Refund Offset (TRO) Program

• This program allows the federal government to withhold all or part of a tax refund from any individual in default of a federal debt, which is not the first attempt the government will make to collect from you; generally speaking, all other forms of debt collection should be tried prior to initiating this program. You must owe at least $100 on your mortgage, and you must be at least 90 days late for the government to withhold your refund. If the government pursues this option, you will receive a notice of the intent to withhold your refund at least 65 days in advance.
  
  

Amount Withheld

• The Department of Treasury's Financial Management Services division can withhold your entire refund if you owe a balance equal to or greater to that refund; there is no limit on this provision. If your refund is less than the amount you owe, the FMS will continue to reduce future refunds or payments accordingly until the amount has been paid off or otherwise settled by independent collections efforts.
  
  

Exceptions

• Not all FHA debts will be withheld from a tax refund. You will be excused if you have filed for bankruptcy protection, are otherwise in negotiations to repay the debt, are currently having your wages garnished by the government, are currently in a repayment agreement, have legally disputed the debt or have reported the debt on form 1099G, government repayments.
  
  

Avoiding the Penalty

• If you would like to receive your federal refund without any deductions but know you owe the FHA, contact the FHA to put a repayment plan in place. As long as you are meeting the terms of your repayment plan, the FHA will not withhold your tax return.