Kentucky Notice of Intent to Offset Refund Checklist
What This Notice Means
A Kentucky tax refund setoff notice informs you that a state agency plans to use your state income tax refund to satisfy an outstanding debt you owe. Under KRS 131.560 through 131.595, the Kentucky Department of Revenue administers this refund offset process, but the agency you actually owe is called the claimant agency.
This claimant agency could be the Department of Revenue itself for unpaid state taxes, or it could be another state agency, such as child support enforcement, a local government, or the Court of Justice. Your notice represents a formal step in the debt collection process, and the refund offset will proceed on the scheduled date unless you take action to resolve the underlying tax debt or exercise your appeal rights.
Why You Received This Notice
State agencies identify taxpayers who owe liquidated debts and submit claims to the Department of Revenue when those taxpayers file tax returns showing refunds due. The claimant agency must send you written notification at least thirty days before submitting your debt to the Department of Revenue for setoff.
Once the Department of Revenue determines that your refund is subject to setoff, it sends you another notice explaining the claim made against your refund and its intention to apply that refund to your debt. This advance notice allows you to request a hearing, verify the debt amount, or arrange payment before the setoff occurs.
Your Right to Request a Hearing
You have thirty days from the date of the setoff notice to request a hearing before the claimant agency. This claimant agency is the entity you owe, not necessarily the Department of Revenue.
Under KRS 131.570, the hearing takes place before the claimant agency as provided by statute or local ordinance. Appeals from the claimant agency's decision follow that agency's normal appeal process.
No funds transfer to the claimant agency until your appeal rights have been exhausted. Previously litigated issues cannot be raised again at the hearing, and you must exercise your appeal rights promptly after receiving proper notice.
What Happens If You Ignore This Notice
The setoff proceeds on the date shown on the notice if you do not respond or resolve the debt. Your refund is kept by the Department of Revenue and applied to the debt owed to the claimant agency.
If your refund exceeds the total debt amount, the Department of Revenue promptly issues the additional refund to you. Remaining balances after partial tax refund offsets still require payment to the claimant agency, which may then pursue additional collection actions against you under its own authority and procedures.
Additional Collection Actions That May Follow
State agencies can take multiple enforcement steps to collect unpaid debts beyond the tax refund offset. Collection procedures may include the following actions:
● Filing a tax lien against your property in the county where the property is located, which becomes public record and may harm your credit rating.
● Levying your wages or bank accounts to satisfy the debt.
● Offsetting your state or federal vendor payments if you receive government contract payments.
● Requesting an injunction from the courts to prevent your business from operating.
● Revoking or denying your professional license, driver's license, or motor vehicle registration under KRS 131.1817 if you meet the definition of a delinquent taxpayer and your debt is not covered by a current installment payment agreement.
Steps to Take After Receiving This Notice
Read the entire notice carefully and identify all key information. Locate the total amount the claimant agency claims you owe, find the scheduled date for the setoff, and write down any case number, notice number, or identification number shown on the notice.
Identify which agency is requesting the setoff, because this is the entity you must contact regarding hearings and disputes. Contact the claimant agency listed on the notice to verify the debt and ask them to explain what the debt is for, what year or years it covers, and whether any payments have already been applied to reduce the balance.
Request a written statement showing the original debt amount, all payments made, any interest or penalties added, and the current balance due. Save all documentation you receive, including any notice of tax due or other collection correspondence related to your account.
Payment Options and Plans
Determine whether you can pay the debt in full before the scheduled setoff date. Paying the full amount owed will stop the setoff from occurring, so contact the agency to ask what payment methods they accept and request written confirmation once they receive and process your payment.
If you cannot pay the full amount, ask whether they offer payment plans or installment agreements. Ask specifically whether setting up a payment plan will delay or stop the scheduled setoff, particularly if the debt involves child support obligations.
For debts owed to the Kentucky Department of Revenue, be aware that a twenty-five percent cost-of-collection fee may be added to your notice of tax due if the debt remains unpaid after sixty days. This fee applies specifically to taxes owed to the department and is governed by KRS 131.440. Payment plans may prevent this fee if you are remitting timely payments under a payment agreement negotiated with the department.
Disputing the Debt
If you dispute the debt amount or believe the debt was calculated incorrectly, request a hearing within thirty days of the notice date. Ask what the hearing request process is and what deadline applies.
Ask whether requesting a hearing will delay the setoff and confirm all instructions in writing. Disputing the debt does not automatically stop the setoff, so obtain written confirmation if the scheduled offset date changes, especially when dealing with state child support agency claims.
What This Notice Does Not Mean
This notice does not mean you are being sued or that criminal charges have been filed. It does not mean your licenses have already been suspended or revoked.
License revocation under KRS 131.1817 is a separate formal enforcement procedure that requires specific statutory criteria, including classification as a delinquent taxpayer, lack of a current installment payment agreement, and formal notice procedures. The setoff notice itself does not trigger automatic license actions, even when the underlying debt involves child support arrears collected through the state child support agency.
Record-Keeping Requirements
Keep the original notice and all written responses you receive. Document the date and time of all phone calls you make, along with the name of any representative you speak with.
Save all payment receipts, confirmations, and correspondence related to the debt. Maintain organized records in case questions arise later about what happened or what was agreed upon, particularly if you filed tax returns expecting refunds that were later applied to outstanding obligations.
Received a State Tax Notice?
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance
