Roughly 13 million Americans receive IRS offset notices each year, meaning their expected tax refund gets redirected — partially or entirely — to cover outstanding federal or state debts before a single dollar lands in their bank account. Most people never see it coming.
I first heard Curtis Fitzgerald’s voice on a Tuesday afternoon in late January 2026. He had called into Money Matters Morning, a personal finance segment on KQED’s local programming out of San Jose, to ask a question about IRS offsets. He wasn’t angry. He wasn’t panicked. He spoke in the measured, tired cadence of someone who has long since stopped expecting good news from envelopes with government logos. I called the station’s producer that same evening and asked for his contact information. He agreed to talk.
When I sat down with Curtis Fitzgerald at a coffee shop near his apartment in the Willow Glen neighborhood of San Jose two weeks later, he was still wearing his name badge from his shift at the front desk of a mid-range hotel on Airport Boulevard. He’d come straight from work. He ordered black coffee and slid a manila folder across the table before I even had my recorder out.
A Refund That Felt Like a Lifeline
Curtis is 65, married, and has worked in hotel hospitality for over two decades. His base salary runs approximately $54,000 per year — enough to manage in the Bay Area if everything goes right, which, as he told me, it rarely does. His wife, Denise, had worked part-time as a medical billing coordinator until October 2025, when her employer eliminated her position as part of a broader staffing consolidation. Her income — roughly $22,000 annually — disappeared with the layoff.
For the 2025 tax year, Curtis had been tracking his withholding carefully. He expected a federal refund of approximately $3,400, money he and Denise had mentally earmarked for health insurance premiums. Neither of them has employer-sponsored coverage — the hotel where Curtis works offers a plan, but at a monthly premium of $680 for a couple, it had always been out of reach on top of rent and utilities.
Curtis filed his return on February 3, 2026, using tax software he’s relied on for years. The software confirmed his $3,400 refund estimate. The IRS Where’s My Refund tool showed the return was accepted within 48 hours and entered processing. He checked it every morning before his shift.
Then, on February 19, the status changed. Not to “Refund Sent.” It changed to a message he hadn’t seen before: his refund had been applied to an outstanding obligation and he would receive a separate notice by mail explaining the offset.
The Cosigned Loan That Came Back Around
In 2019, Curtis’s nephew Marcus asked him to cosign a personal loan of $18,500 through an online lender. Marcus needed the funds to cover equipment costs for a small landscaping business he was starting in Stockton. Curtis agreed. He was the only family member with a credit score high enough to qualify.
Marcus made payments for about fourteen months. Then, in early 2021, the pandemic and a series of contract losses caught up with him. He stopped paying. By mid-2022, the lender had charged off the remaining balance — approximately $14,200 — and sold the account to a collections agency. Curtis received letters. He spoke to collectors. He disputed the debt on the grounds that he had not received any benefit from the loan.
What Curtis didn’t fully understand at the time — and what he described to me with a kind of weary resignation — was the 1099-C. When the collections agency eventually settled the account in 2024 for a reduced amount, the lender issued a Form 1099-C, Cancellation of Debt, to both Marcus and Curtis. The canceled amount reported on Curtis’s 1099-C was $9,800. Under IRS rules, that figure became reportable as ordinary income for the 2024 tax year.
Curtis missed the 1099-C when he filed his 2024 return. He didn’t dispute it deliberately — he simply never received the form at his current address. The IRS, however, received a copy directly from the lender. That discrepancy triggered an automatic system flag, and the resulting underpayment — calculated by the IRS at roughly $2,190 in additional tax plus interest — became the outstanding obligation that swallowed his 2025 refund entirely.
Navigating the IRS With No Road Map
The notice Curtis eventually received in the mail was a CP2000, the IRS’s standard form for proposed changes when reported income doesn’t match what third parties — employers, banks, lenders — have submitted. According to the IRS’s guidance on CP2000 notices, taxpayers have 60 days to respond, either agreeing to the proposed change, disputing it, or providing additional documentation.
Curtis had already missed that window. By the time the original CP2000 arrived — sent to an old address in 2025 and forwarded with a weeks-long delay — the IRS had moved forward with the assessment. His refund offset was the result of a debt that was already finalized in the IRS’s system.
There was a partial resolution buried in the paperwork. Because the assessed amount was $2,190 and Curtis’s refund was $3,400, the IRS applied what it was owed and sent the remaining $1,210 to his bank account approximately 11 days later. He hadn’t known that was coming.
The Deeper Costs Nobody Counts
What struck me most during my time with Curtis was not the dollar figure — though $2,190 is a meaningful loss for a middle-income household now running on a single salary in one of the most expensive metro areas in the country. It was the absence of outrage. He described the entire experience the way someone describes bad weather: something that happens, something you didn’t cause, something you wait out.
His and Denise’s monthly expenses without her income now run approximately $4,800. His take-home pay after taxes and deductions is roughly $3,600 per month. The gap is covered, for now, by drawing down a savings account that held about $11,000 in November 2025. By the time I met with Curtis in mid-February 2026, that balance was under $7,000.
Health insurance remains the household’s most pressing unresolved issue. Since Denise’s employer-sponsored COBRA coverage ended in January 2026, both of them are uninsured. Curtis told me he has been postponing a follow-up appointment with a cardiologist he was referred to in December. He mentioned it once, quickly, and then changed the subject.
He does qualify for Medicare — he turned 65 in September 2025 — but his Initial Enrollment Period closed in December without him enrolling, partly because of confusion over costs and partly because the months surrounding Denise’s layoff left him with little bandwidth for paperwork. He is now in a Special Enrollment Period and told me he had finally started looking at Part B and Part D options the week before we spoke.
What He Knows Now That He Didn’t Then
When I asked Curtis what he would tell someone considering cosigning a loan for a family member, the pause before his answer was long enough that I stopped writing.
The IRS does provide a specific pathway for taxpayers who believe a 1099-C was issued in error or who may qualify for an insolvency exclusion under IRS Publication 4681 — meaning if a taxpayer’s total liabilities exceeded total assets at the time the debt was canceled, a portion or all of the canceled debt may not be taxable. Curtis’s situation may have qualified, according to the IRS Publication 4681 guidelines on canceled debt exclusions, but he hadn’t been aware of the exclusion when he filed — or, to be precise, when he failed to account for the 1099-C at all.
He has since contacted an enrolled agent — a federally licensed tax practitioner — about filing an amended 2024 return and requesting abatement of the penalty and interest assessed on top of the original tax. Whether that process succeeds is uncertain. The enrolled agent told him the abatement request has a reasonable chance given that the original notice went to a wrong address, but nothing is guaranteed.
When I left the coffee shop that afternoon, Curtis was already glancing at his phone — checking the time before his next shift. He thanked me for listening, which felt like the wrong direction for the gratitude to flow. He tucked the manila folder back under his arm and walked out into a gray San Jose afternoon, name badge still clipped to his shirt, heading back to a lobby where he would smile at strangers for the next eight hours.
Some financial stories resolve cleanly. Curtis Fitzgerald’s hasn’t — not yet. He’s still waiting on the amended return, still watching the savings account drain, still working a job at 65 because stopping isn’t an option. The IRS got its $2,190. What it cost him in actual terms is harder to calculate.
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