31 C.F.R. § 285.3

Current through September 30, 2024

Section 285.3 - Offset of tax refund payments to collect past-due support

(a)Definitions. For purposes of this section:

Debt as used in this section is synonymous with the term past-due support unless otherwise indicated.

Debtor as used in this section means a person who owes past-due support.

Fiscal Service means the Bureau of the Fiscal Service, a bureau of the Department of the Treasury.

HHS means the Department of Health and Human Services, Office of Child Support Enforcement.

IRS means the Internal Revenue Service, a bureau of the Department of the Treasury.

Past-due support means the amount of support, determined under a court order, or an order of an administrative process established under State law, for support and maintenance of a child, or of a child and the parent with whom the child is living, which has not been paid, as defined in 42 U.S.C. 664(c) .

State means the several States of the United States. The term "State" also includes the District of Columbia, American Samoa, Guam, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and the Commonwealth of Puerto Rico.

Tax refund offset means withholding or reducing a tax refund payment by an amount necessary to satisfy a debt owed by the payee(s) of a tax refund payment.

Tax refund payment means any overpayment of Federal taxes to be refunded to the person making the overpayment after the IRS makes the appropriate credits as provided in 26 U.S.C. 6402(a) and 26 CFR 6402-3(a)(6)(i) for any liabilities for any Federal tax on the part of the person who made the overpayment.

(b)General rule.

(1) Past-due support will be collected by tax refund offset upon notification to Fiscal Service in accordance with 26 U.S.C. 6402(c) , 42 U.S.C. 664 and this section. Collection by offset under 26 U.S.C. 6402(c) is a collection procedure separate from the collection procedures provided by 26 U.S.C. 6305 and 26 CFR 301.6305-1 , relating to the assessment and collection of certain child and spousal support liabilities. Tax refund offset may be used separately or in conjunction with the collection procedures provided in 26 U.S.C. 6305 , as well as other collection procedures.

(2) Fiscal Service will compare tax refund payment records, as certified by the IRS, with records of debts submitted to Fiscal Service. A match will occur when the taxpayer identifying number (as that term is used in 26 U.S.C. 6109 ) and name of a payment certification record are the same as the taxpayer identifying number and name of a delinquent debtor record. When a match occurs and all other requirements for tax refund offset have been met, Fiscal Service will reduce the amount of any tax refund payment payable to a debtor by the amount of any past-due support debt owed by the debtor. Any amounts not offset will be paid to the payee(s) listed in the payment certification record.

(c)Notification of past-due support -

(1)Past-due support eligible for tax refund offset. Past-due support qualifies for tax refund offset if:

(i)

(A) There has been an assignment of the support obligation to a State and the amount of past-due support is not less than $25.00, or such higher amount as HHS rules may allow, whichever is greater; or

(B) A State agency is providing support collection services under 42 U.S.C. 654(4) and the amount of the past-due support is not less than $500.00; and

(ii) A notification of liability for past-due support has been received by Fiscal Service as prescribed by paragraphs (c)(2) or (c)(3) of this section.

(2)Notification of liability for past-due support and transmission of information to Fiscal Service by HHS. States notifying HHS of past-due support shall do so in the manner and format prescribed by HHS. The notification of liability shall be accompanied by a certification that the State has complied with the requirements contained in paragraph (c)(4) of this section and with any requirements applicable to the offset of Federal tax refunds to collect past-due support imposed by State law or procedures. HHS shall consolidate and transmit to Fiscal Service the information contained in the notifications of liability for past-due support submitted by the States provided that the State has certified that the requirements of paragraph (c)(4) of this section have been met.

(3)Notification of liability for past-due support transmitted directly to Fiscal Service by States. States must notify HHS of past-due support in accordance with the provisions of paragraph (c)(2) of this section unless HHS rules authorize notification to Fiscal Service directly. If authorized by HHS rules, States may notify Fiscal Service directly of past-due support. States notifying Fiscal Service directly of past-due support shall do so in the manner and format prescribed by Fiscal Service. The notification of liability shall be accompanied by a certification that the State has complied with the requirements contained in paragraph (c)(4) of this section and with any requirements applicable to the offset of Federal tax refunds to collect past-due support imposed by State law or procedures. Fiscal Service may reject a notification of past-due support which does not comply with the requirements of this section. Upon notification of the rejection and the reason for rejection, the State may resubmit a corrected notification.

(4)Advance notification to debtor of intent to collect by tax refund offset. The State, or HHS if the State requests and HHS agrees, is required to provide a written notification to the debtor, pursuant to the provisions of 42 U.S.C. 664(a)(3) and 45 CFR 303.72(e) , informing the debtor that the State intends to refer the debt for collection by tax refund offset. The notice also shall:

(i) Instruct the debtor of the steps which may be taken to contest the State's determination that past-due support is owed or the amount of the past-due support;

(ii) Advise any non-debtor who may file a joint tax return with the debtor of the steps which a non-debtor spouse may take in order to secure his or her proper share of the tax refund; and

(iii) In cases when a debt is being enforced by more than one State, advise the debtor of his or her opportunities to request a review with the State enforcing collection or the State issuing the support order as prescribed by the provisions of 45 CFR 303.72(g) .

(5)Correcting and updating notification. The State shall, in the manner and in the time frames provided by Fiscal Service or HHS, notify Fiscal Service or HHS of any deletion or net decrease in the amount of past-due support referred to Fiscal Service, or HHS as the case may be, for collection by tax refund offset. The State may notify Fiscal Service or HHS of any increases in the amount of the debt referred to Fiscal Service for collection by tax refund offset provided that the State has complied with the requirements of paragraph (c)(4) of this section with regard to those debts.

(6)Collection of past-due support enforced by multiple States. When a State has knowledge that the debt is being enforced by more than one State, the State notifying Fiscal Service, or HHS as the case may be, of the debt shall inform any such other State involved in enforcing the debt when it receives the offset amount.

(d)Priorities for offset.

(1) As provided in 26 U.S.C. 6402 , a tax refund payment shall be reduced in the following order of priority:

(i) First, by the amount of any past-due support which is to be offset under 26 U.S.C. 6402(c) and 42 U.S.C. 464 ;

(ii) Second, by the amount of any past-due, legally enforceable debt owed to a Federal agency which is to be offset under 26 U.S.C. 6402(d) , 31 U.S.C. 3720A and § 285.2 of this part; and

(iii) Third, by the amount of any past-due, legally enforceable debt owed to States (other than past-due support) which is to be offset under 26 U.S.C. 6402 (e) or 26 U.S.C. 6402(f) .

(2) Reduction of the tax refund payment pursuant to 26 U.S.C. 6402(a), (c), (d), and (e) shall occur prior to crediting the overpayment to any future liability for an internal revenue tax. Any amount remaining after tax refund offset under 26 U.S.C. 6402(a), (c), (d), and (e) shall be refunded to the taxpayer, or applied to estimated tax, if elected by the taxpayer pursuant to IRS regulations.

(e)Post-offset notice.

(1)

(i) Fiscal Service shall notify the debtor in writing of:

(A) The amount and date of the offset to satisfy past-due support;

(B) The State to which this amount has been paid or credited; and

(C) A contact point within the State that will handle concerns or questions regarding the offset.

(ii) The notice in paragraph (e)(1)(i) of this section also will advise any non-debtor who may have filed a joint tax return with the debtor of the steps which a non-debtor spouse may take in order to secure his or her proper share of the tax refund. See paragraph (f) of this section.

(2) Fiscal Service will advise HHS of the names, mailing addresses, and identifying numbers of the debtors from whom amounts of past-due support were collected, of the amounts collected from each debtor through tax refund offset, the names of any non-debtor spouses who may have filed a joint return with the debtor, and of the State on whose behalf each collection was made. Alternatively, Fiscal Service will provide such information to each State that refers debts directly to Fiscal Service. Fiscal Service will inform HHS and each State that the payment source is a tax refund payment.

(3) At least weekly, Fiscal Service will notify the IRS of the names and taxpayer identifying numbers of the debtors from whom amounts owed for past-due support were collected from tax refund offsets and the amounts collected from each debtor.

(4) At such time and in such manner as Fiscal Service and HHS agree, but no less than annually, Fiscal Service will advise HHS of the States which have furnished notices of past-due support, the number of cases in each State with respect to which such notices have been furnished, the amount of past-due support sought to be collected by each State, and the amount of such tax refund offset collections actually made in the case of each State. As Fiscal Service and HHS may agree, Fiscal Service may provide additional offset-related information about States which have furnished notices of past-due support.

(f)Offset made with regard to a tax refund payment based upon joint return. If the person filing a joint return with a debtor owing the past-due support takes appropriate action to secure his or her proper share of a tax refund from which an offset was made, the IRS will pay the person his or her share of the refund and request that Fiscal Service deduct that amount from amounts payable to HHS or the State, as the case may be. Fiscal Service and HHS, or the appropriate State, will adjust their debtor records accordingly.

(g)Disposition of amounts collected. Fiscal Service will transmit amounts collected for debts, less fees charged under paragraph (i) of this section, to HHS or to the appropriate State. If IRS notifies Fiscal Service that a tax refund payment that was offset was erroneous or otherwise not due to the taxpayer, Fiscal Service will notify HHS or the appropriate State that the tax refund payment was not eligible for offset. Subject to paragraph (h) of this section, Fiscal Service may deduct the amount of the erroneous offset funds from amounts payable to HHS or the State, as the case may be; or, upon Fiscal Service's request, the State shall return promptly to the affected taxpayer or Fiscal Service an amount equal to the amount of the erroneous funds (unless the State previously has forwarded such amounts, or any portion of such amounts, to the affected taxpayer). HHS and States shall notify Fiscal Service any time HHS or a State returns an erroneous offset payment to an affected taxpayer. Fiscal Service and HHS, or the appropriate State, will adjust their debtor records accordingly.

(h)Time limitation. If IRS notifies Fiscal Service on or after January 1, 2016, that a tax refund payment that was offset was erroneous or otherwise not due to the taxpayer, Fiscal Service shall not deduct the amount of the erroneous offset funds from amounts due to HHS or the State, or otherwise demand return of the offset funds from the State pursuant to paragraph (g) of this section, if the date of IRS's notification to Fiscal Service in paragraph (g) is more than six months after the date the tax refund was offset (i.e., the tax refund payment date); and the State has already forwarded the funds as required or authorized by 42 U.S.C. 657 . This paragraph does not apply to paragraph (f) of this section.

(i)Fees. The State will pay a fee to Fiscal Service for the full cost of administering the tax refund offset program. The fee (not to exceed $25 per case submitted) will be established annually in such amount as Fiscal Service and HHS agree to be sufficient to reimburse Fiscal Service for the full cost of the offset procedure. Fiscal Service will deduct the fees from amounts collected prior to disposition and transmit a portion of the fees deducted to reimburse the IRS for its share of the cost of administering the tax refund offset program. Fees will be charged only for actual tax refund offsets completed.

(j)Review of tax refund offsets. In accordance with 26 U.S.C. 6402(f) , any reduction of a taxpayer's refund made pursuant to 26 U.S.C. 6402(c), (d), or (e) shall not be subject to review by any court of the United States or by the Secretary of the Treasury, Fiscal Service or IRS in an administrative proceeding. No action brought against the United States to recover the amount of this reduction shall be considered to be a suit for refund of tax.

(k)Access to and use of confidential tax information. Access to and use of confidential tax information in connection with the tax refund offset program is permitted to the extent necessary in establishing appropriate agency records, locating any person with respect to whom a reduction under 26 U.S.C. 6402(c) is sought for purposes of collecting the debt, and in the defense of any litigation or administrative procedure ensuing from a reduction made under section 6402(c).

(l)Effective date. This section applies to tax refund payments payable under 26 U.S.C. 6402 after January 1, 1999.

(m)Social Security numbers. Fiscal Service will ensure that an individual's Social Security number will not be visible on the outside of any package it sends by mail. In addition, Fiscal Service generally will redact or partially redact Social Security numbers in documents it sends by mail; however, to administer the tax refund offset program, Fiscal Service (and other disbursing officials) may include Social Security numbers in mailed documents, including, for example:

(1) In interoffice and interagency communications;

(2) In notices, including notices to the debtor or payee that an offset has or will occur, when the Social Security number is (or is embedded in) a creditor agency's account number, debt identification number, or debtor identification number;

(3) In response to a request of a debtor or a debtor's representative for records of Fiscal Service's offset activities; and

(4) When required by law.

31 C.F.R. §285.3

63 FR 72094, Dec. 30, 1998, as amended at 72 FR 59480, Oct. 22, 2007; 74 FR 27433, June 10, 2009; 80 FR 81465, Dec. 30, 2015; 87 FR 50248, Aug. 16, 2022

87 FR 50248, 9/15/2022