Can I Avoid Offset?

[selbym]

I have an extension to file my 2024 US taxes, so I need to file in October. I'm joint filing with my husband. He has no income to report, but based on my teacher income here in Jordan, we stand to recieve a refund of about $3000 because of our three kids. The problem is that I have an old student loan that's been in default since 2012 or so. Because the hold on the Department of Education taking refunds for defaulted student loans has been removed, I know that my refund will be taken if I file my taxes now. I've been in communication with the Dept. of Education and I'm starting the process of rehabilitating the loan. I was told that after 4 consecutive payments, the Dept of Education will not offset. My bank is scheduled to mail the 1st payment July 1. That means that my 4th payment probably won't be processed until mid to late October, if not November. What could be a work around for me to submit my tax return and still recieve my refund? 

[DoninGA]

Since you are receiving a tax refund, you can file your tax return at any time, without penalty, on or before October 15, 2028.

If you file your tax return after October 15, 2025, it cannot be e-filed using TurboTax, it can only be printed and mailed.

If you want to wait and file until after the end of November 2025, then you should print the complete return before October 15, 2025, if using the TurboTax online editions, as the online editions will close after that date.

[selbym]

Thank you very much, that is information I am delighted to recieve. Just to confirm, my tax return will not be considered late if I file it as soon as I can confirm that the Dept. of Education will not offset my refund? ...so in general, if you don't owe taxes and you stand to recieve a refund, you do not need to file for an extension? Or I did the right thing in applying for an extension?

[DoninGA]

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@selbym wrote:

Thank you very much, that is information I am delighted to recieve. Just to confirm, my tax return will not be considered late if I file it as soon as I can confirm that the Dept. of Education will not offset my refund? ...so in general, if you don't owe taxes and you stand to recieve a refund, you do not need to file for an extension? Or I did the right thing in applying for an extension?

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As long as you have a valid tax refund and there are no offsets by the IRS which would remove the refund, then an extension would no be required. 

If, for example, you will have taxes owed on the 2024 tax return and you file the tax return after April 15, 2025, then there would be a failure to pay penalty and interest owed on the taxes owed until they were paid.  The extension request only gives you an extra six months to file the tax return.  It does not give an extension to pay any taxes owed.

[Hal_Al]

It is too late to file an extension. The deadline was 4-15-25.  You are now late.  But, there is no penalty because you do not any tax. 

Q. What could be a work around for me to submit my tax return and still receive my refund? 

A. Mail in your return after  the 4th payment is processed in mid to late October.  There is still no penalty (other than the long wait for your refund because you did not e-file). 

[AmeliesUncle]

A few things to note:

If you filed an extension, your tax return is due October 15th.  Even though there are not penalties or interest when you receive a refund, that doesn't necessarily mean there are no negative consequences to filing a late tax return.  For example, filing late could eliminate the ability to make certain elections.

Even after you make four payments to your loan, it could take some additional time for the offset removal to be processed by the Department of Education, then by the IRS.  In some cases, it could take many months.

If you file the tax return and they do offset the refund, it will reduce the amount of debt that you have, which can be a good thing.

[selbym]

I really appreciate your response. All of the responses I received were informed and thoughtful. I followed up with the information offered here by calling the IRS and speaking with a representative in the legal department. Since my tax situation is very simple, because we do not have much income to report, the rep told me, while she couldn't officially speak on behalf of IRS and advise me to file late, she did explain that when $0 are owed, the penalty calculated will equal zero. So, she said as judiciously as she could, that technically it would not penalize me to file after October 15. Even e-filing may be an option as late as November, closer to Thanksgiving. So I've got my fingers crossed that the offset cam be removed by that time. 

Thanks again for taking time to respond to my original post.

[AmeliesUncle]

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@selbym wrote:

Even e-filing may be an option as late as November, closer to Thanksgiving.

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I could be wrong, but I think TurboTax stops e-filing in mid-October, despite the fact the IRS e-file system is open until around Thanksgiving-ish.

If you are determined to avoid the offset, you have up to three years to file and get a refund.  Tax professionals (and possibly other DIY software, but I'm not certain) can e-file until Thanksgiving-ish and for the next two years, but not TurboTax.  But you could also paper-file the return.

[NCperson]

@selbym  

most don't understand how this "late filing" works. 

if you are due a refund, there really is no such thing as 'late filing'.  You have three years from the original filing deadling (so until Oct 15, 2028 in your case) to claim the refund.  The IRS would just assume you NEVER filed so it can keep your refund! 

if you owe the IRS, you must pay that amount by the due date (April 15, 2025 in your case).   There are interest charges of 7% (annualized) for each day the payment is late.  The extension does not delay the payment of the money; it only defers the filing of the paperwork.   If the paperwork is filed late (after Oct 15, 2025 in your case, since you filed for an extension), there is a 5% PER MONTH penalty TIMES the amount due for up to 5 months.  But read that closely, the penalty is based on the AMOUNT DUE....and if there is no amount due, there is no penalty! 

The IRS cares more amount the money than the paperwork when you owe them.  When it owes you, it doesn't care if you never file!