Federal Tax Refund Offset Program

New Jersey Judiciary Probation Child Support Enforcement

Revised 7-2015

In this Topic

  1. A. Authority
  2. B. Overview
  3. C. Selection Criteria
  4. D. Notification of Intent
  5. E. Appeal Procedure
  6. F. PCSE Review of the Appeal
  7. G. Receipt and Distribution of Funds
  8. H. Negative IRS Adjustments
  9. I. Erroneous Federal Tax Refund Offsets based upon Fraudulent Returns
  10. NJCSI Handout Materials

A. Authority

  

United States Code:

42 U.S.C. §664

Code of Federal Regulations

 

45 C.F.R. § 301.1
45 C.F.R. § 303.72
47 C.F.R. § 1:1950-52

Other Authorities

 

AOC Memo August 21, 1990
DFD AT No. 14-17 Reporting of State Payments on a Federal Offset Program (FOP) Collection Refunded to a Third Party

B. Overview

The Federal Tax Refund Offset Program intercepts NCPNon-custodial parents’ taxes when child support arrears meet the eligibility requirements.  It is a substantially automated process that requires minimal interventions and monitoring.  The review and resolution of any Administrative Appeal is a manual process that requires the exchange of documents, such as correspondence, orders and audits, between the OCSSOffice of Child Support Services Tax Offset Unit, PCSEProbation Child Support Enforcement Units and the CPCustodial parent or party and NCP.

C. Selection Criteria

  1.  Federal Tax Refund Offset

For a case to be selected the following conditions must be met:

  1. there must be an open IV-D case (alimony only cases are not selected because they are Non IV-D),  
  2. a valid Social Security Number must exist,
  3. the Tax Exempt code field is blank,
  4. a valid interstate status must be entered (in UIFSAUniform Interstate Family Support Act cases, only the petitioning state has authorization to certify arrears for Federal Administrative Offset),
  5. the NCP must owe a minimum of $500 in Non TANF arrears or if a TANFTemporary Assistance for Needy Families case, the obligor must owe a minimum of $150 in TANF arrears,

Note: NJKiDS will not select cases for Federal Tax Refund Offset where there is an active income withholding and arrears equal to or less than one month’s worth of support.

Note: Alimony arrears are also subject to Federal Tax Refund Offset when it is ordered in conjunction with child support and the CP has filed for IV-D services.

Note: If the NCP has multiple cases, the case with the largest arrears will appear on TAXI.  If there are 2 cases with the same arrears the case with the oldest order is the case submitted for offset.

D. Notification of Intent

  1.  The Pre-Offset Notice (Notice) is a letter of intent.  The Notice is mailed by the OCSS to the address provided by the state at the time of submission, not the address on the DEMO screen.  It informs the NCP (and joint-taxpayer) that the case will be submitted to the U.S, Department of Treasury for Administrative Offset and/or Federal Tax Refund Offset unless the full amount of arrears is paid within 30 days of the date of the Notice.
  2. The Notice also informs the NCP of the procedure for filing an appeal.  It provides instructions for the injured spouse (non-obligated filer in a joint Federal Income Tax Return) who does not want their portion of the Federal Income Tax Refund subject to offset.  (i.e. the joint-taxpayer/injured spouse is instructed to file an Injured Spouse Claim and Allocation Form No. 8379 with the IRS).

Note: If the CP is the injured spouse, (separated, but in the process of divorce), he or she must still file an injured spouse claim with the IRS.

E. Appeal Procedure

  1.  Effective the date of the Pre-Offset Notice (Notice), the person identified as the NCP has 30 days to submit an appeal in writing to the PCSE Unit supervising the case.   
  2. The NCP must state the reasons and include evidence supporting the claim.  
  3. Appeals must be based on a mistake of fact in order to be considered as valid. For example:
    1. the person identified in the Notice is not the NCP
    2. the account does not have arrears
    3. the arrears are not IV-D arrears
    4. the NCP produces a valid court order exempting the NCP from tax offset

F. PCSE Review of the Appeal

  1. Upon receipt of the appeal, PCSE staff must open the Administrative Review chain on NJKIDS and will have 30 business days to conduct an Administrative Review.  
  2. If the claim is valid, PCSE staff will update the TAXI screen to exempt the case from offset.  Any erroneous information is corrected by PCSE staff so that the case no longer meets the eligibility requirements. A detailed explanation is entered on TAXI Notes.

    1. Note: Only when a court order recommends the case be exempted from reporting should PCSE staff update the TAXI screen utilizing the “Exempt” code.  This is because once the “Exempt” code is entered the case is exempted forever.  PCSE staff must review the order to determine whether the exemption is intended for future offsets or if no time frame is provided; staff should enter an end date 90 days from the court order date.  In this way, the case can be selected for future offset should the arrears qualify.  

  3. PSCE staff must notify the NCP, CP, and their attorneys (if represented by one) within 10 business days of the date, time and place of the Administrative Review.
  4. For appeals that appear to have issues too complex such as an arrears dispute, to resolve through an Administrative Review, PCSE staff should schedule the matter for a hearing before a CSHOChild Support Hearing Officer.
  5. In UIFSAUniform Interstate Family Support Act matters where New Jersey is the responding state, the NCP has the right to have the appeal heard in the state where the support order was entered.  In such cases, PCSE staff must notify the petitioning state (central registry) through a CSENet transaction and provide that office with copies of all court orders and payment records.  
  6. If it is concluded after the Administrative Review or hearing that the case does qualify for Federal Income Tax Refund Offset, PCSE staff does not need to take further action.  Federal Offset (receipt of tax refund) will occur provided that the NCP files a tax return and the IRS determines that a refund is due.

    1. Note: If an NCP is not satisfied with the results of the Administrative Review, he or she has the option to file a motion to stop Federal Income Tax Refund Offset.

  7. If it is concluded after the Administrative Review or hearing that the case does not qualify for Federal Income Tax Refund Offset, PCSE staff will update the TAXI screen with the appropriate exemption code.  Any erroneous information is corrected by PCSE staff so that the case no longer meets the eligibility requirements. A detailed explanation is entered on TAXI Notes.

Please see Informational Transmittal 10-01.

G. Receipt and Distribution of Funds

  1.  Effective 35 days after the date indicated on the Pre-Offset Notice, if the OCSE does not receive instructions via NJKiDS to delete a case, the OCSE submits the NCP’s Federal Tax Offset certification record to the FMSFederal Management Services.
  2. In the event that a Federal Offset occurs, the Financial Management Services (FMS) will notify the NCP in writing (i.e. FMS Notice of Offset) of the amount withheld and to which PCSE Unit the offset will be sent.   Normally it will take up to 4 weeks from the date of the FMS notification letter for the Finance Division to receive the offset.   
  3. Federal Income Tax Refund Offsets are received by NJKiDS via batch processing from the OCSE collections report. Each NCP’s tax intercept has a unique reference number that can be viewed on the RHIS screen.
  4. Federal Income Tax Refund Offsets identified as a Joint-Federal Income Tax Refund Offset automatically go on hold for 6 months and then are automatically released.  This serves as protection from possible loss of funds in the event that a non-obligated spouse files an amended federal tax return (i.e. injured spouse claim with the IRS).  In this situation, the IRS may conclude that a portion of the (or entire) joint-federal tax offset is due to the non-obligated spouse.  
  5. If an Injured Spouse Waiver Form (Attachment 1609A) is received prior to the expiration of the 6 months, a finance worker can manually release the tax monies.  The Waiver Form states that the current (injured) non-obligated spouse has not and will not file an Injured Spouse Claim (Form 8379) with the IRS.  
  6. Federal Income Tax Refund Offsets received but not yet posted to the account can be identified in the DHRR screen.
  7. Federal Tax Refund Offsets that have been posted to the account can be identified on the ELOG screen.
  8. In UIFSA cases where New Jersey is the petitioning state and an offset is applied, the responding (enforcing) state must be notified.  The responding state will apply a payment credit to their record of the account.  NJKiDS will generate a CS065 Notice to Out of State Agency of Tax Offset letter to the responding state.  When NJKiDS processes a tax receipt on an interstate case, a CSENet transaction is generated.  When two states have a claim (CP is out of state and New Jersey is collecting a TANF debt), both will submit for the NCP and certify their arrears to the FMS.
  9. All states with the exception of South Carolina are notified through CSENet.  
  10. When New Jersey is a responding state and the tax offset is received by the initiating state, the receipt of the CSENet transaction will generate an Action Alert to the case owner to do a financial note for an OBAA adjustment with a tax adjustment reason code.

H. Negative IRS Adjustments

  1.  After a Federal Tax Refund Offset has been properly applied to an account, the IRS may demand that the offset (or portion of it) be returned.  The reasons may include: the offset was fraudulent, it was sent to the PCSE Unit in error, the IRS reexamined the NCP’s tax return and determined that no refund was actually available for offset purposes, the non-obligated spouse later decided to file an Injured Spouse Claim (amended tax return).

    1. Note: There is no time limit for a non-obligated spouse to file an Injured Spouse Claim to recoup his or her portion of any refund.

  2. The IRS notifies the OCSS that they are withholding the said amount from future offset batch payments.   
  3. NJKiDS will automatically reverse the payment and repost the arrears to the NCP’s case. This will create a negative adjustment and initiate a repayment plan from the CP. The CP can call the OCSS to negotiate the recoupment percentage for repayment.
  4. Information regarding negative adjustments can be viewed at the case level on the RHIS, ELOG, RRAR and CREC screens.
  5. When any portion of a Federal Tax Refund Offset collection must be refunded to a third party a request is submitted to the OCSS to enter a State Payment for the amount of the refund.
  6. PCSE staff must submit a help desk ticket via email to DFD-NJKIDS-SupportDesk@dhs.state.us.
  7. The subject line must read State Payment Request and the ticket must include the unidentified receipt number, amount refunded to the third party taxpayer, third party identification number (OTHP ID) and case number (if applicable).
  8. OCSS will confirm when the transaction has been successful and inform the Help Desk to close the ticket and notify the requester.

I. Erroneous Federal Tax Refund Offsets based upon Fraudulent Returns

Effective January 1, 2016, the Department of Treasury (Treasury), the IRSInternal Revenue Service, and the Bureau of the Fiscal Services amended the regulation governing the offset of tax refund payments to collect past-due child support obligations. This regulation will limit the time period during which Treasury may recover erroneous tax refund offset collections from states in instances where the states have already forwarded such funds to custodial parents as required or authorized by applicable laws.  This amendment provides a six (6) month time limit from the offset date to recover and recoup erroneous offsets from states.  After the six-month period, Fiscal Service may not deduct the amount of an erroneous payment from a state’s future collections if the state has already forwarded the offset funds to the family. Please see Action Transmittal 16-03: MNFR Hold for Special Investigations (supersedes AT-15-09).

 The FOP User Guide is available in the Federal Offset Program Library on the OCSEOffice of Child Support Enforcement website at http://www.acf.hhs.gov/programs/cse/newhire/library/fop/fop.htm. The Guide provides state Child Support Enforcement (IV-D) agencies with information on the technical aspects of establishing and maintaining the interface between their statewide automated systems and the FOPFederal Offset Program.

 For NJKiDS instructions on FOP, click the link below:

NJCSI Handout Materials

For more information and guidance, please refer to the following document:

 

Institute for Families, School of Social Work  Rutgers, the State University of New Jersey Judiciary Probation Child Support Enforcement

New Jersey Judiciary Probation Child Support Enforcement, revised 7-2015