Debt Collection Procedures By Federal Income Tax Refund Offset

29 C.F.R. Part ..., Subpart V
in effectEffective: 2024-07-01

29 C.F.R. § 102.168 Federal income tax refund offset; purpose and scope.

The regulations in this subpart specify the Agency procedures that will be followed to implement the federal income tax refund offset procedures set forth in 26 U.S.C. 6402(d) of the Internal Revenue Code (Code), 31 U.S.C. 3720A, and 301.6402-6 of the Treasury Regulations on Procedure and Administration (26 CFR 301.6402-6). This statute and the implementing regulations of the Internal Revenue Service (IRS) at 26 CFR 301.6402-6 authorize the IRS to reduce a tax refund by the amount of a past-due legally enforceable debt owed to the United States. The regulations apply to past-due legally enforceable debts owed to the Agency by individuals and business entities. The regulations are not intended to limit or restrict debtor access to any judicial remedies to which the debtor may otherwise be entitled.

29 C.F.R. § 102.169 Definitions.

(a) Tax refund offset refers to the IRS income tax refund offset program operated under authority of 31 U.S.C. 3720A. (b) Past-due legally enforceable debt is a delinquent debt administratively determined to be valid, whereon no more than 10 years have lapsed since the date of delinquency (unless reduced to judgment), and which is not discharged under a bankruptcy proceeding or subject to an automatic stay under 11 U.S.C. 362. (c) Individual refers to a taxpayer identified by a social security number (SSN). (d) Business entity refers to an entity identified by an employer identification number (EIN). (e) Taxpayer mailing address refers to the debtor's current mailing address as obtained from IRS. (f) Memorandum of understanding refers to the agreement between the Agency and IRS outlining the duties and responsibilities of the respective parties for participation in the tax refund offset program.

29 C.F.R. § 102.170 Agency referral to IRS for tax referral effect; Agency responsibilities.

(a) As authorized and required by law, the Agency may refer past-due legally enforceable debts to the Internal Revenue Service (IRS) for collection by offset from any overpayment of income tax that may otherwise be due to be refunded to the taxpayer. By the date and in the manner prescribed by the IRS, the Agency may refer for tax refund offset past-due legally enforceable debts. Such referrals shall include the following information: (1) Whether the debtor is an individual or a business entity; (2) The name and taxpayer identification number (SSN or EIN) of the debtor who is responsible for the debt; (3) The amount of the debt; and (4) A designation that the Agency is referring the debt and (as appropriate) Agency account identifiers. (b) The Agency will ensure the confidentiality of taxpayer information as required by the IRS in its Tax Information Security Guidelines. (c) As necessary, the Agency will submit updated information at the times and in the manner prescribed by the IRS to reflect changes in the status of debts or debtors referred for tax refund offset. (d) Amounts erroneously offset will be refunded by the Agency or the IRS in accordance with the Memorandum of Understanding.

29 C.F.R. § 102.171 Cost shifting.

Costs incurred by the Agency in connection with referral of debts for tax refund offset will be added to the debt and thus increase the amount of the offset. Such costs may include administrative costs and attorneys fees.

29 C.F.R. § 102.172 Minimum referral amount.

The minimum amount of a debt otherwise eligible for Agency referral to the IRS is $25 for individual debtors and $100 for business debtors. The amount referred may include the principal portion of the debt, as well as any accrued interest, penalties, administrative cost charges, and attorney fees.

29 C.F.R. § 102.173 Relation to other collection efforts.

(a) Tax refund offset is intended to be an administrative collection remedy to be used consistent with IRS requirements for participation in the program, and the costs and benefits of pursuing alternative remedies when the tax refund offset program is readily available. To the extent practical, the requirements of the program will be met by merging IRS requirements into the Agency's overall requirements for delinquent debt collection. (b) As appropriate, debts of an individual debtor of $100 or more will be reported to a consumer or commercial credit reporting agency before referral for tax refund offset. (c) Debts owed by individuals will be screened for administrative offset potential using the most current information reasonably available to the Agency, and will not be referred for tax refund offset where administrative offset potential is found to exist.

29 C.F.R. § 102.174 Debtor notification.

(a) The Agency must send appropriate written demand to the debtor in terms which inform the debtor of the consequences of failure to repay debts or claims owed to the Board. (b) Before the Agency refers a debt to the IRS for tax refund offset, it will make a reasonable attempt to notify the debtor that: (1) The debt is past-due; (2) Unless the debt is repaid or a satisfactory repayment agreement is established within 60 days thereafter, the debt will be referred to the IRS for offset from any overpayment of tax remaining after taxpayer liabilities of greater priority have been satisfied; and (3) The debtor will have a minimum of 60 days from the date of notification to present evidence that all or part of the debt is not past due or legally enforceable, and the Agency will consider this evidence in a review of its determination that the debt is past due and legally enforceable. The debtor will be advised where and to whom evidence is to be submitted. (c) The Agency will make a reasonable attempt to notify the debtor by using the most recent address information available to the Agency or obtained from the IRS, unless written notification to the Agency is received from the debtor stating that notices from the Agency are to be sent to a different address. (d) The notification required by paragraph (b) of this section and sent to the address specified in paragraph (c) of this section may, at the option of the Agency, be incorporated into demand letters required by paragraph (a) of this section.

29 C.F.R. § 102.175 Agency review of the obligation.

(a) The Agency official responsible for collection of the debt will consider any evidence submitted by the debtor as a result of the notification required by § 102.174 and notify the debtor of the result. If appropriate, the debtor will also be advised where and to whom to request a review of any unresolved dispute. (b) The debtor will be granted 30 days from the date of the notification required by paragraph (a) of this section to request a review of the determination of the Agency official responsible for collection of the debt on any unresolved dispute. The debtor will be advised of the result.

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