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Treatment of Overpayments

The Department of Revenue is moving forward with a major modernization project that involves moving all the taxes the agency administers into one, integrated tax system. This will allow the department to upgrade its technology, greatly improve customer service, and meet its goal of gaining efficiencies in the administration of taxpayers' accounts. Importantly, the agency will now effectively link all tax accounts owned by a single taxpayer in one place.

As this work continues, the department will be making changes to the way it handles taxpayer overpayments. Effective Dec. 1, 2022, the agency will implement the offsetting of overpayments which exist and are unused on older final tax years against collectible liabilities between all tax types under one taxpayer. The department possesses the authority to do this under longstanding Pennsylvania law.

Additional information regarding administration of this process follows:

  1. When a taxpayer has an overpayment in one tax type and a collectible liability in another tax type, the department will automatically apply the overpayment toward the liability. The taxpayer does not need to take any action for the offsetting to occur. Automated offsetting reduces the probability of the taxpayer receiving both a bill and a refund from the department. This can also minimize the interest due on outstanding liabilities.
    1. Specific taxes/programs excluded from this policy include Inheritance Tax, Realty Transfer Tax, Medical Marijuana Tax, and the Property Tax Rent/Rebate program. The department will also exclude overpayments resulting from Motor License Fund tax revenue from offsetting into other funds/the General Fund.
  2. In addition, the department will no longer maintain overpayments as credits indefinitely on taxpayer accounts. When an overpayment exists on a taxpayer account, the department will take the following actions:
    1. If a collectible liability exists on another period within that same tax type, the department will automatically apply the credit toward the liability. Oldest periods will be offset first.
    2. If a collectible liability exists on another tax type registered by the taxpayer, the department will automatically apply the credit toward the liability. Tax types will offset based on a set tax type priority order. Oldest periods will be offset first within an account.
    3. If the overpayment has not been offset under the provisions above, the department will automatically carry the credit forward to the tax type's most recent tax period available, unless otherwise directed by the taxpayer on their tax return.
    4. If there is no further activity on the carry-forward period and the credit is approaching the statute of limitation to request the credit as a refund, the department will again notify the taxpayer of the credit and will take appropriate action to resolve the credit if the taxpayer is unresponsive to the notification of credit.

The department will issue an Offset Notice when an overpayment from a period is applied to another liability. The notice will provide the tax type from which the overpayment originated and tax type to which it is being applied. The notice will provide any credit amount remaining after applying the previous overpayment to the taxpayer's outstanding liabilities. A taxpayer that elects to challenge the offset may file a petition for refund with the department in accordance with the Tax Reform Code (72 P.S. § 10003.1).

The department will not offset an overpayment against liabilities of affiliated entities as each entity is its own taxpayer. To the extent an entity wishes to assign an existing overpayment to another taxpayer which is an affiliated entity, the department will not conduct such an offset or apply a transfer of the credit/overpayment without a specific request from the taxpayer which had the original credit/overpayment.

Taxpayer questions on the department's offsetting policy should be submitted through the Online Customer Service Center. Taxpayers can securely submit a message through this system in a process that is very similar to sending an email.