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just wanted to share my experience and hopefully help anyone that needs to request an Offset Bypass Refund (OBR). This process is when your current year tax refund is going to be applied to a past Federal Tax Issue ONLY! This process cannot be used if the offset is for any other reason.
For example, you just filed your current year return and you are due a refund of x.xx dollars. Your return is accepted and approved by the IRS but you discover BEFORE your tax assessment date (more on this below) the IRS is taking your refund (offsetting it) because the IRS claims you have a FEDERAL TAX owed to them for your return filed x years ago. So long as the tax assessment date, referred to as the 23C or TC 150 date has not passed, you can request that the offset be stopped (bypassed) in the event that the offset will cause you a financial hardship.
An Offset Bypass Refund is NOT an easy process and there is a very small window of time that you have to act. Most IRS representatives have NO knowledge of this process. I was told over and over again that no such procedure existed. I would then recite the IRS manual and heading where the info could be found, and the responses were astonishing to say the least. Those responses are a whole different can of worms :)
Although the IRS manual clearly says a tax advocate is not required, GET ONE! You will most likely miss the cut off dates if you don’t.
The two most important aspects to this procedure are:
1. Again, the offset must only be for a federal tax owed. It cannot be used for student loans, child support, etc. Most likely if you call the offset hotline number and the system is able to find your offset information, THIS REQUEST WILL NOT BE SUCCESSFUL, because you probably owe for something other than federal taxes to the IRS.
2. The OBR must be submitted, processed and approved at the LATEST, the THURSDAY before your 23C assessment date, also referred to as the TC 150 date. You will need to find out what your 23C date is either by creating an online IRS account where you can view your transcripts (the signup process is not an easy one) or get it from an IRS phone representative. This date is extremely important. Once this date has passed, it is virtually impossible to request an offset bypass refund. And because of how the processing centers input the information, everything has to be finalized the THURSDAY evening before the 23C assessment date. Period.
*Note that the 23C date is NOT your DDD, it is not when the IRS accepted your return. It is a date, generally a few weeks after all of these dates have passed and is only available on your transcripts (or by an IRS agent or tax advocate)
You will need valid proof that the offset will cause you a significant hardship. Don’t try to b.s. your way through it, as it most likely won’t get approved by the tax advocate. If you just don’t want the IRS to take your refund and offset it, because you had a Hawaii trip planned, unpack your bags because this process won’t help.
I successfully did an offset bypass refund last year and the year before. Both tax liabilities were due to line number errors on my schedule C where I reported my gross receipts and cost of inventory sold. I had to file amended returns correcting where I entered this information. But because of the input errors, the IRS showed I owed them for under reported income. But once the figures were correctly entered, the final amounts were identical to the original returns submitted. In a nutshell, the IRS was showing I owed them back taxes, however with the data correctly entered on the amended returns, there wasn’t anything owed to the IRS. Their delay and complete disorganization at processing the amended returns is what caused them to try and offset my refunds for 2 consecutive years.
The bypass can be done, but again, it will require you to be diligent and organized. You will need to read and understand parts of the IRS manual, as most IRS agents and some tax advocates do not understand the process.
A good starting place is at this link
Find the section
Advocating for Taxpayers Seeking Offset Bypass Refunds
and learn the procedures. If you are not actively involved in the process and leave it up to the IRS or advocate to handle the OBR request, you will most likely fail.
I know this isn’t a process needed by a lot of tax filers, but hopefully if you are one of the few that it applies to, this will help you get started and be successful.