If they confiscated your $1,500 for back taxes, then yes, your tax debt would decrease.
This is not something that you would get a credit for on your 2024 taxes, however, you would need to enter it as other income to be taxed even though you didn't actually receive it, it is still taxable income.
To enter it without a W2-G select the following:
- Federal
- Income and Expenses
- Scroll down to Less Common Income and click Show More
- Start next to Miscellaneous Income
- Start next to Other Reportable Income