Will the IRS Take My Tax Refund for My Unpaid USDA Mortgage?

What happens if the USDA took my tax refund? Can I get it back? Are you wondering why you didn't receive your federal tax refund this year?

Such questions should be running through your mind if you have a mortgage from The United States Department of Agriculture (USDA). It may not be just a "misunderstanding" if you're delinquent on your USDA mortgage.

​Read More:​ Where's My Tax Refund: An Easy Guide

A USDA home loan is a zero-down mortgage administered through the USDA loan program that's operated by the United States Department of Agriculture. Only properties located in rural or suburban areas can qualify for these mortgages.

Loans can either be obtained through a participating local lender or directly from the USDA. It's also possible to get a USDA home-improvement loan that will allow you to fund home repairs or upgrades.

USDA home loans are only given for owner-occupied primary residences in qualifying areas. Borrowers must also be able to prove U.S. citizenship (or permanent residency), a recent history of dependable income, and a passing credit history.

As you may know, government agencies have a way of knowing when taxpayers haven't paid what they owe. You can thank the Debt Collection Improvement Act of 1996 for that. This act centralized government collection of delinquent debt between the U.S. Department of the Treasury and the Financial Management Service.

Agencies are now equipped to use sophisticated cross-referencing tools when delinquent payments are in play. This is the case when it comes to late or unpaid USDA mortgage bills. Could your federal tax refund be in jeopardy this year if you're delinquent on your USDA mortgage bill? The answer is "yes."

​Read More:​ What Types of Homes Are Approved for USDA Loans?

Can you use an USDA loan on foreclosure? Yes, you could, but the home must be located in a qualified rural area. Generally, USDA mortgages have their fair shares of pros and cons.

USDA mortgages are attractive to those who quality for them because they provide a 30-year fixed rate with no money down. However, signing up for one means being on the hook for what qualifies as a federal payment. This means that there's no hiding the fact that you're late on a payment.

The process in place when you’re delinquent on a USDA mortgage payment includes:

• A collection attempt regarding the amount of your debt.
• Handing your debt over to the U.S. Department of the Treasury for collection purposes if ​180 days​ pass without a payment.
• Monitoring any government funds that you receive by the U.S. Department of Treasury, and offsetting these funds by the amount of debt that you owe on your USDA mortgage.

Government debt collectors don't exactly have to go digging to find what you owe. Instead, software programs compare Social Security numbers and Individual Taxpayer Identification Numbers of debtors against records for federal payments before sending out those federal payments. When a match is found, a tax refund is held back or reduced.

​Read More:​ Will the IRS Take My Tax Refund for My Unpaid USDA Mortgage?

Playing a cat-and-mouse game with the government is never wise. It's important to seek debt relief to avoid foreclosure and other consequences of a delinquent USDA mortgage. Unfortunately, it's not just tax refunds that can be held back if you owe money. Debts can also be taken out of Social Security and veteran benefits if you're delinquent.

However, if you miss a mortgage payment, it's not the end of the world. It takes ​90 days​ of missed payments to begin the foreclosure process. If you are going to miss a payment or have missed a payment, it's important to talk to your lender and come up with a plan to get back on track. There are many foreclosure myths, and it's important to separate the truth from reality.

If you're having issues with a USDA mortgage debt, it's a good idea to seek relief before it's time to file your taxes. This will help you get back on the road to being able to receive tax refunds and other federal funds again.