Action Transmittal AT-94-05 - Part 2


Child Support Collection by IRS through offsetting Federal Income Tax
Refunds
                    ACTION TRANSMITTAL
                    AUGUST 23, 1994
                    OCSE-AT-9405      
Continued:

II.  PRE-OFFSET NOTICE AND COMPLAINT PROCEDURES
     A.  PRE-OFFSET NOTICE
The State IV-D Agency, or OCSE at the State's request and if OCSE 
agrees, must send a written advance notice to individuals before 
referring their names to IRS for offset (see EXHIBIT C).  The notice 
must inform noncustodial parents of the following:

          o    The right to contest the State's determination 
               thatpast-due support is owed or the amount of past-due 
               support submitted;
          o    the right to an administrative review by the 
               submitting State or at the noncustodial parent's 
               request the State with the order upon which the 
               referral for offset is based; and
          o    the procedures and timeframe for contacting the 
               IV-DAgency in the submitting State to request
               administrative review.

Additionally, IRS recommends that States include in their notice the 
following language:  "If you are married, filing a joint income tax 
return, and you incurred this debt separately from your spouse, who 
has no legal responsibility for the debt and who has income and 
withholding and/or estimated tax payments, he or she may be entitled 
to receive his or her portion of the joint refund.  If your spouse 
meets the criteria stated above, he or she may receive his or her 
portion of the joint refund by filing a Form 8379, Injured Spouse 
Claim and Allocation.  Form 8379 should be attached to the top of the 
Form 1040 or 1040A when you file, or be filed according to other 
instructions as indicated on the Form 8379."

OCSE, at a State's request, will include the following language on 
the pre-offset notice:  "The amount of this past-due support 
obligation may be reported to the credit bureau."  This language may 
be requested by checking the appropriate section on EXHIBIT R.  
States that are not sure if they will be reporting to credit bureaus 
may want to consider having the phrase included anyway.  In 
accordance with OCSE-IM-88-1 dated April 12, 1988 the State where the 
noncustodial parent lives should submit to the credit bureau which 
may or may not be the State which is submitting the case for offset.
The pre-offset notice must include, in addition to the elements 
listed above, the arrearage amount which will be submitted to IRS and 
a State or local address and telephone number for the taxpayer to 
contact if he/she desires to contest the offset or has any questions.

In order to ensure that all notices meet the requirements of 45 CFR 
303.72(e), States electing to issue their own pre-offset notices must 
submit a copy to the OCSE Regional Office for review by July 15.  
OCSE will review the notice to see that it meets the above 
requirements.  Pre-offset notices must be mailed by the end of 
October to give sufficient time for taxpayers to respond to the State 
agency.  IV-D Directors must certify that notices for the prior 
processing year were mailed by the end of October and that notices 
for the upcoming processing year will be mailed by October 31.  This 
certification should be forwarded to the OCSE Regional Office at the 
time of the review of the pre-offset notice.  A copy of the notice 
and certification should also be sent to the OCSE Special Collections 
Unit.

States that choose to have the required pre-offset notice printed and 
mailed by OCSE will be charged for this service.  OCSE charges 
include the costs of printing the notices, customized envelope, mail 
processing, and postage.  Any fees charged the State are reimbursable 
at the current Federal matching rate for child support administrative 
expenses so that the Federal Government still bears the majority of 
the cost (66 percent in Fiscal Year (FY) 94.  For PY95, the cost for 
the service will be $.32 per notice.  All States who elect to have 
OCSE issue the notices will be required to provide advance payment, 
based upon an estimated submittal caseload times the cost per notice.  
The procedures are as follows:

     o    States requesting OCSE to issue their pre-offset notices 
          are to furnish the information requested in EXHIBIT AA to 
          OCSE by July 15.

     o    Information provided should include an estimate of the 
          number of cases which will be submitted for the processing 
          year for offset.  Even though it may be difficult for some 
          States to offer an exact estimate, it is important that 
          States give as accurate an estimate as possible in July.  

     o    A check to reimburse OCSE for the service must be included 
          with the form.  (The dollar amount will be determined by 
          the estimated number of cases to be
          submitted times the cost per notice, 32 cents.)   The check 
          should be made payable to the Office of Child Support 
          Enforcement, and should cite appropriation number 7541536.  
          For those States that require a Federal Tax I.D., the 
          number is 53-019-6960.  The CAN # is 4G995207.


     o    Once payment is received by OCSE, States will receive a 
          letter of acknowledgment.  States requiring an invoice or 
          bill prior to making payment should contact OCSE.

     o    If at the time of final tape submittal, it turns out that 
          the State estimate was too low, the State must include a 
          check for the balance due.  If the estimated caseload is 
          too high, resulting in an overpayment, the State will be 
          issued a refund for the excess amount following the 
          completion of the pre-offset notice mailing.

The State IV-D Agency may elect to use a State or local address and 
telephone number as the contact reference on the pre-offset notice 
mailed by OCSE (see EXHIBIT S).  Local addresses may also be used as 
the return address on these pre-offset notices.  However, if the 
State elects to have OCSE print a local contact, individual case 
submissions must contain local identification codes.  This 
information must be submitted to OCSE, on magnetic tape or cartridge 
in the format described in EXHIBIT D.

IRS allows States the capability of using a local address and 
telephone number, as the contact reference on the offset notice.  
This enhancement expedites the response to noncustodial parent's 
inquiries and complaints.  Irrespective of whether a local address or 
State address is used, there must be a reference to 'Child Support' 
or 'Family Support' in the address to distinguish the offset from the 
other Federal Agencies participating in the program.  In addition, 
specific names of contact persons should not be used.  Instead, the 
State may wish to use a title such as Offset Coordinator.  States 
must not use 'IRS' in their address thus avoiding any 
misrepresentation to taxpayers.  IRS will specify on the offset 
notice whether the case is an AFDC or non-AFDC case.  This will 
appear just below the child support enforcement agency address.  
States are to notify OCSE, if a local address and telephone number is 
to be used for the IRS offset notice (see EXHIBIT R).  If the State 
elects to have IRS print a local contact, individual case submissions 
must contain local identification codes which correspond to the FIPS 
codes.  If during the processing year an address or telephone number 
changes, States should notify OCSE in writing of the change.  OCSE 
will report this change to IRS so their offset notice will reflect 
the correct information.

Again this year, IRS is requiring each State to certify that all 
addresses and telephone numbers have been verified.  This form (see 
EXHIBIT X) must be returned by each State for both local and State 
address/telephone verification.  Maintaining accurate address and 
telephone information is extremely important and it is imperative 
that States provide correct information.

     B.   COMPLAINT PROCEDURES

An essential element of the offset process is the opportunity 
afforded noncustodial parents to contest the offsetting of all or any 
portion of their refund.  Since the complaint procedures vary 
somewhat between interstate and intrastate cases, they will be 
treated separately.  Complaint procedures are the same for assigned 
arrears and non-AFDC arrears.

     1.   PROCEDURES FOR CONTESTING IN INTRASTATE CASES

Upon receipt of a complaint from a noncustodial parent in response to 
the advance notice or concerning a tax refund which has already been 
offset, the State must review its submittal and attempt to resolve 
the complaint.  If the taxpayer requests an administrative review the 
IV-D Agency must send a notice to the noncustodial parent and, in 
non-AFDC and medicaid-only cases, the custodial parent of the time 
and place of the administrative review of the complaint and conduct 
the review to determine the validity of the complaint.  If the 
complaint concerns a joint tax refund that has not yet been offset, 
the IV-D Agency must inform the noncustodial parent that the IRS will 
notify the noncustodial parent's spouse at the time of offset 
regarding the steps to take to secure his or her proper share of the 
refund.  If the complaint concerns a joint tax refund which has 
already been offset, the IV-D Agency must refer the absent parent to 
the IRS.  
If the administrative review results in a deletion of, or decrease 
in, the amount referred for offset, the IV-D Agency must notify OCSE 
using the procedures for reporting updates.  Timeframes for reporting 
updates are dependent upon when the administrative review is 
conducted.  If the review occurs prior to January 10, the update 
should be reported during the State's normally scheduled update 
process.  If, however, the review occurs after January 10 and results 
in a deletion or modification, the update must be reported to OCSE 
within 10 work days of the administrative review.  (See EXHIBIT N for 
Tape Submission Requirements.)  If, as a result of the administrative 
review, an amount which has already been offset is found to have 
exceeded the amount of past-due support owed, the IV-D Agency must 
take steps to refund the excess amount to the noncustodial parent 
promptly, and report to OCSE a State payment.  In joint return cases, 
the refund check should be payable to both parties.  IRS will provide 
both taxpayers' names on the monthly collection reports in cases 
involving joint returns.

     2.  PROCEDURES FOR CONTESTING IN INTERSTATE CASES

In compliance with 45 CFR 303.72 (g)(2), if the noncustodial parent 
requests an administrative review in the submitting State, the IV-D 
Agency must follow the same procedures set forth above for intrastate 
cases.  In particular, the submitting State should review its 
computation of the arrearage submitted for offset and the underlying 
documentation, any new evidence provided by the noncustodial parent, 
and attempt to resolve the complaint if possible.

If the complaint cannot be resolved by the submitting State and the 
noncustodial parent requests an administrative review in the State 
with the order upon which the referral for offset is based, the 
submitting State must notify that State and provide all necessary 
information (including a copy of the order and any modifications, a 
copy of the payment record or the custodial parent's affidavit, and 
the custodial parent's address for a non-AFDC/Medicaid-only case) 
within 10 days of the noncustodial parent's request for an 
administrative review.  States should use the interstate transmittal 
form to refer a case to the State with the order to conduct an 
administrative review.  (See EXHIBIT U.)

At the same time the submitting State must send OCSE an update to 
report that the case is being transferred to the State with the order 
for the purpose of conducting an administrative review.  When 
reporting the transfer to OCSE, the submitting State must also 
indicate to which State the case is being transferred.  States must 
report this transfer one of three ways.  If the volume of transfers 
is considerable, we encourage States to report on tape using the 
format in EXHIBIT N, or via your personal computer.  (See EXHIBIT Z 
for details on updating cases by PCs.)  States may also update using 
MITRONS.  (See EXHIBIT CC.)  When this update is received, OCSE will 
generate an update request form to be forwarded to the State with the 
order.  (See EXHIBIT V.)  This form contains case data from the 
submitting State, i.e., SSN, local code, case number, and original 
arrearage, so that the State with the order can easily submit a 
deletion or modification via PC, tape, or MITRON, based upon the 
outcome of the administrative review.  Further explanation of this 
form is provided in the update section.

The State with the order must send a notice to the noncustodial 
parent and, in non-AFDC/Medicaid-only cases, the custodial parent, of 
the time and place of the administrative review; and the State must 
conduct the review and make a decision within 45 days of receipt of 
the notice and information from the submitting State.  The decision 
should be based upon the accuracy of the arrears and whether or not 
it is legally enforceable under State law.  If the State conducting 
the review is not the State which submitted the case for offset, it 
is not appropriate to base the review on policy considerations, i.e., 
whether the State with the order would have submitted the case for 
offset under its procedures.

If the administrative review results in a deletion of, or decrease 
in, the amount referred for offset, the State with the order must 
notify OCSE within the same timeframes set-out for intrastate cases.  
Again, States are encouraged to use Pcs in order to expedite 
reporting of updates.  OCSE will also notify the submitting State 
when the State with the order has deleted or modified a case due to 
an administrative review.  If the offset has already occurred, the 
State with the order must notify the submitting State of its 
decision, and the IV-D Agency in the submitting State must take steps 
to refund any excess amount offset to the absent parent promptly.  
The State may not delay refunds of excess amounts withheld pending 
receipt of the offset from the IRS.  When an administrative review is 
conducted in the State with the order, the submitting State is bound 
by the decision made by that State.  Please note, however, that if 
the submittal is based upon orders from two States, the reviewing 
State should only verify the arrearage which accrued under its order.  
Such submittals will usually require two separate administrative 
reviews if the taxpayer challenges the entire submittal.  And, as in 
intrastate cases, refunds in joint return cases should be payable to 
both parties.

In computing incentives, if the case is referred to the State with 
the order for an administrative review, collections made as a result 
of Federal tax refund offset will be treated as having been collected 
in full by both the submitting State and the State with the order.  
When a collection is received for a case which has been transferred 
to the State with the order for the purpose of an administrative 
review, OCSE will report the offset to both States.  If at a later 
date there is an adjustment on a transferred case, the adjustment 
will be reported to both States.  The submitting State is liable to 
IRS for any adjustments and both States will have to reflect such 
adjustments when reporting collections to OCSE.  The report issued to 
the State with the order (transfer State) will be in hard copy and 
will be in addition to the monthly collection report.  (See narrative 
description of major reports.)

     3.   GUIDELINES FOR SOCIAL SECURITY NUMBER ERROR PROBLEMS

To achieve uniformity and to ensure that the proper procedures are 
followed in any case in which there is a discrepancy in the 
identification of the taxpayer certified for offset and/or the 
taxpayer actually offset, due to an SSN error, IRS has worked with 
OCSE to develop the following guidelines for the State to follow in 
what was determined to be the three most common situations.

SITUATION 1:

If the State simply identifies the wrong SSN for an individual, the 
State should make a prompt refund to the taxpayer, delete the case, 
and report a State payment to OCSE.  For example, William Green, SSN 
222-33-4444 was submitted instead of the actual noncustodial parent 
William Green whose SSN is 888-99-7777.  In this instance the wrong 
SSN has been identified for the noncustodial parent and the taxpayer 
being offset is entitled to a prompt refund from the State.

SITUATION 2:

The second type occurs when a person (other than the obligor) files 
his/her return using another person's SSN (the obligor's).  One such 
example is when the State submits John Smith, SSN 333 22-5555 and his 
current spouse, Mary Smith, files her return separately using the IRS 
label mailed to John Smith.  If Mary files her return prior to John, 
her refund will be offset because the IRS computer will read his 
label.  Since the name on the label is the person submitted for 
offset, even though the return is for Mary Smith, IRS will forward 
her refund to the submitting State.  In this situation, the State 
should not refund to the taxpayer but should refer Mary Smith to the 
IRS who must correct their records, adjust the State's collection, 
and make a refund to her.

Another example of this particular type of problem is very similar to 
the one above except, in this situation, it's a father/son 
relationship.  If Jose Rodriques Jr. files using his father's SSN and 
is offset, but is not the absent parent, the State should not make a 
refund to him.  Instead Jose Rodriques Jr. should be referred to IRS 
so his tax account can be updated correctly.  Again, IRS would adjust 
the State's collection and refund to Jose Rodriques Jr.  Then when 
Jose Rodriques Sr. files his refund, it can be offset.

SITUATION 3:

Occasionally two persons are assigned the same SSN by the Social 
Security Administration (SSA).  If this is the situation, the first 
person filing his/her return will be offset.  If, however, the person 
is not the obligor, the State should not make a refund to the 
taxpayer.  Instead, the person should be referred to IRS who will 
assign a temporary filing number, credit the taxpayer's account with 
the refund, and have the person obtain a new SSN from SSA.  An 
adjustment to the State's collection will be made by IRS and a refund 
will be made to the taxpayer thus correcting the offset.  
Consequently, when the obligor files his return, the refund will be 
eligible for offset.