Federal Refund Held By IRS

Backround information:

Ten years ago I was Sentenced in a Military Court for $7,000 in bad checks made on military installations. I was sentenced to 10 months confinement and reduced to the grade of Private E-1. The Judge did NOT order me to pay resitution on these checks. My pay was also forfeited for ten months to the military. Upon Discharging from the Army I was even given back over $1200 in backpay for duty prior to conviction.

Now the IRS is holding my entire refund to pay towards the the $7,000 in checks from 1991

Question: Since the Military Judge did not order "Me" to pay restititution on these checks and I forfetited all of my pay for almost an entire year, can the IRS take my refund?

This is a tough one can someone please help?

2-21-2002

Please explain. When you say your pay was forfeited, do you mean that you received no pay at all during your 10 month confinement (as a penalty for your "crime"), or is it possible that the monthly check you would normally have received was used or applied as restitution to repay the $7,000?

Did you ever receive any kind of pay stub or verification that a check had been issued during your confinement period?

SINCERELY,

advisor

Return Held

I did not receive Pay Statements during the 10 months of confinement. It is my assumption that the withheld pay was turned over to the victims of the bad checks. The victims in the case being the federal govt.

2-23-2002

DEAR CHRIS:

The main reason that the IRS would be interested is that they feel that the $7,000 income you got from the bad checks was unreported income, and therefore you did not pay income tax on it.

(1) How much is your refund that is being withheld?

(2) How much money is the IRS asking you to repay?

Is there any mention on the IRS notice of the name of the military agency or person who informed them that this debt was due? Someone had to have informed them of this debt and you need to try to find out who, if possible. Could this account have been turned over to a collection agency?

At some point you may want to consider making an effort to get access to all of your military paperwork on this matter and try to get copies of everything on it. You can't just ASSUME that the forfeited pay was turned over to victims of the bad checks--you need to find out DEFINITELY, ONE WAY OR ANOTHER. It could also mean that forfeiting meant that no checks at all were issued during that time period.

In my opinion, the IRS should only be asking you to repay whatever STATE AND FEDERAL INCOME TAXES would be due on the $7,000 (plus whatever interest and penalties that may have accrued since 1991) and you should not be asked to repay the entire $7,000 unless that is what the govt. agency is asking. Yes, they do have the right to hold your refund, but you have the right to appeal their decision, though it doesn't like you would win. You will eventually have to pay something, but there needs to be a determination of exactly what.

At some point in the future you may want to consider asking a local tax settlement attorney represent you in getting this amount negotiated to a lower rate or at least where you could arrange to make monthly payments until the debt is paid off. Or you could contact them yourself at the 1-800-829-1040 number to try to make arrangements with them yourself if you don't want to pay attorney fee on this matter.

Good luck in getting this matter resolved. It may take a little persistence.

SINCERELY,

advisor

when you were sentenced did they also say "all pay and allowances"if so then your money went to the rec fund and if you wrote those checks to the exchange then aafes must of reported the loss which is how the IRS got involved-don't expect a refund next year if its not paid off.