Here's How to Dispute Social Security Overpayment or Tax Refund Offset
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For people relying on Social Security benefits, every check matters. That is why an overpayment notice from the Social Security Administration (SSA) or the sudden loss of a tax refund to repay a debt can feel overwhelming. These situations are more common than many realize, and recent rule changes in 2025 have raised the stakes. The good news is that you have rights, options and a clear process to challenge an overpayment or reclaim a seized tax refund.
Why Overpayments Occur
An overpayment takes place when the SSA sends you more money than you were entitled to receive. It can be because your income changed, you did not report wages on time or the agency miscalculated your benefit. The difference between what you got and what you should have received is considered a debt, and SSA will ask for it back.
Sometimes, these errors stem from complicated rules rather than intentional mistakes. But regardless of how the overpayment occurred, the responsibility to repay usually falls on you. That is why reporting wages every month is essential for people on a Supplemental Security Income (SSI) or a Social Security Disability Insurance (SSDI).
New Rules Make Recovery Tougher
Beginning March 27, 2025, the SSA can withhold 100% of monthly benefits for new overpayments. Previously, the agency generally recovered only 10-50% each month, leaving recipients with at least some income. While SSI beneficiaries are still subject to a 10% cap with certain hardship protections, SSDI recipients face a real risk of losing their entire check until the balance is paid. This change has made it even more urgent to understand your rights and dispute unfair debts quickly.
Steps to Dispute an Overpayment
If you receive an overpayment notice, do not panic, but take a systematic approach instead. Read the notice carefully. Errors in income calculations, payment dates or other factors are not uncommon. If something looks off, request your full file from SSA to see how they determined the amount.
If you believe that the overpayment is incorrect, you can appeal by filing Form SSA-561 within 60 days of the notice. Your explanation should be clear, pointing out factual mistakes or legal grounds for disputing the debt.
If you do not contest the amount but believe that a repayment will cause severe financial hardship or the overpayment was not your fault, you can request a waiver using Form SSA-632. There is no strict deadline for this, and filing quickly can pause collection efforts while SSA reviews your case. Supporting documents like medical bills, income statements and household expenses strengthen your claim.
If a waiver is denied and repayment is unavoidable, you may still negotiate more manageable terms. Form SSA-634 allows you to ask for a lower monthly recovery rate. This option can help spread out repayment without cutting off all your income.
When Are Tax Refunds Seized?
Overpayments are not always collected directly from your Social Security checks. In many cases, the government intercepts your federal tax refund instead. The Treasury Department or IRS must notify you before this happens. That notice will outline the debt and provide instructions for disputing it.
If you have already appealed the overpayment or received a waiver, you can use that decision to stop the refund offset or request the return of funds that were wrongly seized.
Joint tax filers face an additional complication. If your spouse owes the debt but you do not, you can file IRS Form 8379, known as the Injured Spouse Allocation, to recover your share of the refund. This safeguard ensures that you are not penalized for a spouse’s debt.
The Bottom Line
Overpayment notices and tax refund offsets can be stressful, especially under the new rules that allow Social Security to withhold an entire benefit check. But recipients are not powerless. By reviewing notices carefully, appealing errors, requesting waivers or negotiating repayment, you can protect your financial stability.
The key is to act quickly. Deadlines are strict for appeals and early action can pause recovery efforts while your case is reviewed. Whether through self-advocacy or with the help of an attorney, challenging an overpayment is possible resulting in financial stability.