Getting your tax refund with a defaulted student loan now & in the future


Pandemic relief measures have made everyone’s IRS refund seized by the Department of Ed eligible for a refund to debtor (ie, you). If you haven’t gotten anything in the mail, the number to call is (800)621-3115, which is the Department of Ed’s Default Resolution Group. Expect to be on hold for a while and have your account numbers handy. I had to call at least twice (maybe three times) and they put a trace on mine twice before I got mine. So stick to it.

Also, this policy will be around until at least January 31, 2021. So I’m going to make every effort to file before then on the slight chance I can squeak out 2020’s refund.

I don’t know if everyone knows this, but I thought I’d share.

This process got me thinking about whether or not I could modify my W-4, so that I don’t end up having a refund when I file. Then there’s less of my money the government could seize. And it turns out there is.

The IRS has the user friendly web site that will calculate what your expected refund would be. The great thing about this site is–it will calculate your W-4 modification to ensure (close to, at least) a $0 refund. The modification appears as a credit in box 3 on the W-4, something I didn’t even know was possible. (Having no dependents, I never bothered with it.) And even the W-4’s instructions didn’t mention such a possibility, so I was a little leery. But it was the IRS telling me to do this on their site. So I submitted a new W-4 to my HR, and they processed, no problem, which surprised me. And it has reduced my refund (which was already built up in 2020).

If you’d like to not have an IRS refund, start this calculation after you get your first paycheck in 2021. I just tried to do it for 2021, but I need my first paycheck for the year. For 2021, I want to end up owing the IRS ever so slightly; that way, I’m paying just my tax and not risking a seized refund. Besides, a refund is just a free loan to the government.