FEDERAL TAX INTERCEPT

CS 678P Federal Tax Intercept - Refunds to the Noncustodial Parent and Disbursed Funds Not Redeemed

10/98 Revised 06/18/24 Training Completed 07/01/24 Last Reviewed 07/29/24

Introduction

ORSIS applies Federal tax refund intercept payments to the arrears debt(s) that are certified for Federal tax intercept. When the amount of the Federal tax intercept payment received by the Office of Recovery Services/Child Support Services (ORS/CSS) exceeds the certified balance, or the debt/case no longer meets the certification criteria, the excess amount is held at the obligor’s participant account with a transaction hold on the payment, and it will appear on the Funds Remaining Report.

Federal regulations found at CFR 303.72(h) state as follows:

“(4) If the amount collected is in excess of the amounts required to be distributed under section 457 of the Act, the IV-D agency must repay the excess to the noncustodial parent whose refund was offset or to the parties filing a joint return within a reasonable period in accordance with State law.”

When you see a transaction hold on your funds remaining report, hold the payment for 30 days. Once the 30 days have passed, release the hold and refund the payment to the noncustodial parent (NCP) as soon as possible.

Disbursed Funds Not Redeemed

It is the position of CSS that once federal tax money is disbursed, this new payment (i.e., the warrant and any record of such warrants, including information about the amounts) takes on a new identity and becomes state information rather than FTI. The money is no longer FTI because it is no longer considered the NCP's tax refund or information concerning the NCP's tax refund.

Refund Warrant to NCP Not Redeemed

If a Federal tax intercept refund warrant to the NCP is returned or the NCP does not cash the warrant, ORSIS will place an automatic hold on the payment. Only the ORS Financial Services Unit can release this hold. If this hold is placed on the refund transaction of Federal tax offset funds not redeemed, take the steps listed below:

1. If the refund warrant was not cashed (warrant is stale dated), verify if the refund is still applicable, i.e., the NCP's debts are current.

a. If the refund is still to be issued, attempt to contact the NCP by phone or mail asking that a reissued warrant be cashed. If successful contact with the NCP has been made, contact Financial Services to ask that the hold be released. Immediately after the hold is released, refund the payment to the NCP.

b. If the refund to the NCP is not to be reissued as debts are now owed, contact Financial Services to ask that the hold be released. After the hold is released, let ORSIS distribute the payment automatically to the NCP's debt consistent with priority-posting rules.

c. If contact with the NCP has been unsuccessful and you are unable to apply the payment to a debt owed by the NCP, you must make a good faith attempt to locate the NCP by applying the 75-day locate timeframe. You must employ the same procedures used when trying to meet 75-day timeframes for exhausting locate.

2. If the refund warrant was returned from the NCP’s last known address, you must make a good faith attempt to locate a new address for the NCP by applying the 75-day locate timeframe. You must utilize the same procedures used when trying to meet 75-day timeframes for exhausting locate.

a. If you obtain a new address for the NCP, add it to ORSIS and contact the Financial Services helpline to ask that they release the hold. Immediately after the hold is released, refund the payment to the NCP’s new address. If the refund to the NCP is not to be reissued as debts are now owed where the refund warrant funds can be applied, after the hold is released, let ORSIS distribute the payment automatically to NCP's debt consistent with priority-posting rules.

b. If you are unable to relocate the NCP after the 75-day locate attempt and current support is charging or if there is another debt owed by the NCP where the refund warrant funds can be applied, contact the Financial Services helpline to ask that they release the hold. After the hold is released, ORSIS will distribute the payment consistent with priority-posting rules.

NOTE: If current support is charging on the NCP's case and there is no liability, ORSIS will apply the money as pre-paid current support and distribute the payment from funds remaining when ORSIS charges current support for the next month.

3. If you are unable to relocate the NCP, or apply the payment to pre-paid current support or to an arrears debt owed by the NCP, ask Financial Services to transfer the payment to the surplus funds account.

NOTE: The good faith effort means that 75 days have passed from the date determined that location was necessary, and all appropriate location sources have been accessed. Only ask Financial Services to transfer payments to the surplus funds account as a last resort and only after good faith 75-day locate effort has been made to find the NCP, and after attempting to apply the payment to other debts owed by the NCP.

Disbursement Warrant to CP Not Redeemed

If a Federal tax intercept disbursement warrant to the Custodial Parent (CP) is returned from the last known address, Financial Services adds a hold to the case for a bad address until the warrant stale dates or a new address is found. If the CP does not cash a disbursement warrant (warrant is stale dated), ORSIS will place an automatic hold on the transaction. Only the ORS Financial Services Unit can release these holds. If these holds are placed on the payment transaction of disbursed Federal tax offset funds not redeemed, take the steps listed below:

1. If the disbursement warrant was not cashed (warrant is stale dated), attempt to contact the CP by phone or mail asking that a reissued warrant be cashed. If successful contact with the CP has been made, contact Financial Services to ask that they release the hold. Financial Services will issue a new disbursement warrant to the CP.

2. If the disbursement warrant to the CP cannot be reissued as contact with the CP has been unsuccessful, you must make a good faith attempt to locate the CP by applying the 120-day locate procedure. The initial 60 day time period begins the day the warrant is sent. After the initial 60 day time period, you may then send the 60 day Closure Notice if applicable. Once the 120-day locate effort has passed, follow the steps below:

a. If there is debt owed by the NCP (whose Federal tax refund was intercepted) where the disbursement warrant funds can be applied, contact Financial Services to ask that the hold be released. After the hold is released, immediately transfer the payment to the appropriate debt owed by the NCP.

b. If no debt is owed by the NCP where the payment can be applied, process a refund request of the payment to the NCP.

3. If the disbursement warrant was returned from the CP's last known address, you must make a good faith attempt to locate a new address for the CP by applying the 120-day locate procedure. The initial 60 day time period begins the day the warrant is sent. After the initial 60 day time period, you may then send the 60 day Closure Notice if applicable. Once the 120-day locate effort has passed, follow the steps below:

a. If you are unable to relocate the CP after the 120-day locate attempt and there is debt owed by the NCP (whose Federal tax refund was intercepted) where the disbursement warrant funds can be applied, contact Financial Services to ask that the hold be released. After the hold is released, immediately transfer the payment to the appropriate debt owed by the NCP.

b. If no debt is owed by the NCP where the payment can be applied, process a refund request of the payment to the NCP.

4. If you obtain a new address for the CP, add it to ORSIS and contact the Financial Services helpline to ask that the hold be released. Financial Services will re-mail the warrant or issue a new disbursement warrant to the CP.

5. If you are unable to apply the payment to a debt owed by the NCP, refund the payment to the NCP or relocate the CP, ask Financial Services to transfer the payment to the surplus funds account.

NOTE: Only ask Financial Services to transfer payments to the surplus funds account as a last resort and only after following the procedures to locate the custodial parent, and after attempting to apply the payment to debts owed by the NCP or refunding the payment to the NCP.

Procedures – Applying Intercept to Uncertified Debts

You may apply excess tax money to uncertified arrears debt is if there is a certified debt and the balance on the applicable screen is now zero because the debt rolled to another debt group. In these situations, the balance is technically the same money and you may apply an excess tax payment to that debt.

NOTE: If the tax payment is applied to a Non-IV-A debt and the CP is the applicant, ORSIS will withhold a $25.00 Federal tax intercept fee before disbursing the payment to the CP. If the intercept fee has already been withheld from a portion of the same intercept payment that applied to a certified Non-IV-A debt, the fee will be duplicated when the remaining portion of the tax payment distributes to a Non-IV-A debt. If this occurs, refund the second fee to the CP.

EXAMPLE: A tax intercept payment of $600.00 is received; ORSIS applies $400.00 to a NADC SCC debt and charges the $25.00 Federal tax intercept fee to the CP. You apply the remaining $200.00 to the NADC AUO debt. ORSIS does not identify this money as the same intercept money and will withhold an additional $25.00 from the payment applied to the AUO debt, which will result in two intercept fees charged on the same payment. Request a refund to the CP for the fee withheld from the payment that applied to the AUO debt.

Advance Refund

There are times when it may be appropriate for you to refund the NCP’s Federal tax refund intercept payment prior to receiving the funds from the IRS. Request an advance refund only when the case was certified in error because the NCP was not delinquent; or, when the tax refund was intercepted in error because the NCP’s Social Security number on the case is incorrect.

Do not request an advance refund unless the above criteria are met. ORSIS will not allow you to request an advance refund unless the NCP is certified for Federal tax refund intercept. Take the steps below to request an advance refund.

1. Obtain a copy of the IRS intercept notice from the NCP that indicates the amount of the Federal tax payment that will be sent to CSS.

NOTE: Since the NCP is providing a copy of the notice, the Federal tax information contained in the notice is being disclosed by the NCP; therefore, it does not need to be secured by CSS.

2. Enter a case narrative explaining why the case qualifies for an advance refund.

3. Verify the Federal tax refund that was intercepted is being sent to CSS. The IRS notice lists the child support office that intercepted the Federal tax refund intercept payment.

4. Check the ORSIS to verify that the Federal tax refund intercept payment has not posted.

5. Forward the IRS intercept notice to your Regional CSU Manager, Regional Quality Assurance Specialist (QA), Associate Regional Director (ARD), or Regional Director (RD) to request the advance refund.

6. The Regional CSU Manager, QA, ARD, or RD will enter the refund request on ORSIS.