The Federal Tax Refund Offset Program… AKA Tax intercept
The New Year always brings questions on the potential of using the tax intercept as a way to collect child support arrears. We encourage clients to speak with their local support office to see if they qualify for this action. We do remind them that even if the intercept is put into place, there is still the possibility that this will not occur for 3 reasons:
-the non-custodial parent may not file his taxes
-the non-custodial parent may not be eligible for a refund
-the current spouse, if filing jointly with the non-custodial parent, may file for injured spouse status which would allow then to get their portion o the tax refund
The Federal Tax Refund Offset Program collects past-due child support payments from the tax refunds of parents who have been ordered to pay child support and are delinquent in their payments or have significant arrears. The program is a cooperative effort between the federal Office of Child Support Enforcement (OCSE), the Internal Revenue Service (IRS), the Financial Management Service of the Department of the Treasury, and state child support agencies. This program was enacted in Congress in 1981 and at that time, was designed to collect unpaid support for child support cases for clients on public assistance. In 1984 it was expanded to include all child support cases. Effective October 1, 2007, the Deficit Reduction Act of 2005 allowed states to submit cases for non-TANF debts regardless of the child’s age. There are criteria that child support cases must meet for the tax intercept to be used. Since the program began in 1981, over $50 million in unpaid support has been recovered.
So how does this all work? Noncustodial parents, whose child support debts meet the criteria for Federal Tax Refund Offset, will receive a pre-offset notice explaining the process. The notice includes the amount of past-due child support owed at the time the notice is sent. The actual amount deducted from the tax refund may differ to account for payment or non-payment of child support after the Pre-Offset Notice is mailed. The state will update the debt amount regularly, but may not issue a new notice each time the debt changes. The pre-offset notice also includes information about the Administrative Offset and Passport Denial programs and other actions the state may take to enforce a child support obligation. When tax refunds are processed, those who owe past-due child support are identified and all or part of the refund is intercepted. The intercepted funds are forwarded through OCSE to the state child support agency to repay the past-due support. When the intercept occurs, a notice is sent to the non-custodial parent stating that all or part of the federal tax refund has been intercepted because of the child support debt owed. The notice will advise the non-custodial parent to contact the local child support office that established the order for further information. It normally takes three to five weeks from the time of the offset until the money is sent to the state that submitted the case for offset. For non-TANF cases, the state may hold the money for up to six months if the offset involves a joint tax return. Only cases receiving full services through the state child support agency are eligible for Federal Tax Refund Offset. In some states, the custodial party may be charged a small fee for this service. Cases eligible for tax refund offset are those cases that have a delinquent child support debt. If the child support order includes an award for spousal support, the tax refund may also cover the past-due spousal support. For a case receiving Temporary Assistance for Needy Families (TANF), the noncustodial parent must owe at least $150; in a non-TANF case, the amount owed must be at least $500. Usually the state in which the custodial party lives will submit the debt for Federal Tax Refund Offset. In cases where the noncustodial parent owes a child support debt to more than one state, each state will submit their case for offset. The noncustodial parent will receive a separate notice for each state’s debt, and will have the right to contest each state’s debt amount.