Action Transmittal AT-94-05 - Part 5
Child Support Collection by IRS through offsetting Federal Income Tax
AUGUST 23, 1994
V. IRS SERVICE FEE STATEMENT AND ADJUSTMENT BILLING
The IRS fee is directly deducted from the collections. OCSE will
issue monthly statements detailing the amount of money deducted from
the monthly collection reports for the IRS fee. (See EXHIBIT G.)
During the last few months of the processing year, many States'
adjustments exceed collections resulting in a "negative collection
transfer." When this occurs, OCSE issues the State a bill to be paid
to the Fresno Service Center. (See EXHIBIT Q.) This bill is
included with the monthly collection report issued to the State.
Overdue payments to IRS (60 days past the invoice date) will be
collected by deducting the amount of the past-due payment from future
collections. IRS will also charge interest
on all late payments, at a rate prescribed in the Treasury Fiscal
Requirements Manual (1 TFRM 6-8020.20). Therefore, States are
strongly encouraged to make prompt payment to IRS, thus avoiding the
possibility of being charged interest on the delinquency.
VI. INQUIRIES TO OCSE
State agencies are encouraged to call OCSE directly with any
questions or problems that arise concerning the Tax Refund Offset
Program. State and local agencies should not, however, refer
individuals to OCSE. Also, on those occasions when questions arise
concerning IRS action, State agencies are to contact OCSE and not the
IRS Service Center. On joint return cases where the non-obligated
spouse is seeking a partial refund, the non- obligated spouse should
be referred to IRS. As in the past, State inquiries should be
directed to OCSE Regional Representatives or to the OCSE Special
Collections Unit at
(202) 401-9389, 4th Floor, Room 484, 370 L'Enfant Promenade, SW,
Washington, DC 20447.
VII. INQUIRIES TO STATES
The State contact for the Federal Tax Refund Offset Program continues
to change each year. To keep an updated listing please fill out
EXHIBIT M and return it to our office.
OCSE will provide explanatory reports on all phases of program
operations with sufficient information to allow the State agency to
take appropriate action. All State reports will include both
AFDC/foster care and non-AFDC/Medicaid-only cases, sorted by local
code and SSN. All reports issued by OCSE will contain a case type
indicator for each record.
IX. SECURITY AND SAFEGUARDING REQUIREMENTS
The Internal Revenue Code (IRC) was amended effective December 31,
1985, to add a new section, 26 USC 6103(l)(11), pertaining to
disclosure of information obtained by State agencies under the Tax
Refund Offset Program. In general, this law provides that tax return
information so obtained can only be used in "establishing appropriate
agency records or in the defense of any litigation or administrative
procedure ensuing from a reduction made under section 6402(c)." In
addition, changes were made to section 6103(p)(4) of the IRC
regarding safeguarding of information obtained through the tax refund
offset process. Magnetic tapes and hard copy transmittals of tax
return information obtained through OCSE must be protected from
unlawful use or disclosure in accordance with these guidelines.
X. QUALITY CONTROL
When submitting tapes or transmitting data via the PC, it is
imperative that States take appropriate measures to ensure quality
control. Before data is forwarded to OCSE, it should be reviewed to
make sure the data is formatted correctly and that accurate
information is sent. Such reviews should occur any time data is
forwarded to OCSE and particularly at the time of the final submittal
tapes. For final submittal tapes, States should check for such
things as: all counties have been accounted for, there are both
AFDC/foster care cases as well as non-AFDC/Medicaid-only cases, the
number cases is accurate, and case information is correctly
XI. DATA TRANSMISSION METHODS
l. Mailing of tapes or Cartridges - This has been widely used
for many years and still remains a preferred method for extremely
large volumes of data (100,000 or more cases) and/or when
requirements (equipment, software, trained staff) for other methods
are not available in the State. However, for OCSE, this method is
extremely labor intensive, especially if tapes/cartridges must be
recycled. For this reason, we are encouraging States to explore
other methods of forwarding and receiving data. Furthermore, unless
States send tapes or cartridges via express mail, there is a built in
delay before the data can be processed. If a State requests that
OCSE return their data on cartridge, then the State must submit data
to OCSE on a cartridge. OCSE also requests that States return all
tape cartridges for recycling. All unreturned tapes must be cleaned
and degaussed to prevent any unauthorized usage of data.
2. MITRON - A tape-to-tape data transmission system that
derives its name from its manufacturer. It consists of a tape drive,
main unit, and software to make it work. In order to use this method
of data transfer, both the sending and receiving stations must have
MITRON equipment and special software. This method is capable of
handling a large volume of data. Best results are obtained when
processing moderate to large (5,000 to 100,000 cases) volumes of
data; however, it is limited to one reel of tape. The advantages
include the elimination of the delay caused by the mailing of tapes
and next day processing by the data center. Currently, procedures
exist which allow States to transmit data to OCSE and receive the
return information on MITRON.
3. On-line Data Entry - Direct access to the OCSE mainframe
via a PC with modem. This method is appropriate for small volumes of
data (100 cases or less) and allows for immediate processing by the
OCSE mainframe. States currently use this method to submit updates
for the Tax Refund Offset Program. If a State wishes to begin using
on-line data entry, please contact the Special Collections Unit on
(202) 401-9389. States will be requested to submit a "Computer
User's Guide to Good Security Practices" (see Exhibit Z). The
Special Collections Unit will provide the State with any information
they will need. (See Exhibit Z.)
4. File Transfer - Electronic transfer of files between a
personal computer (PC) and the mainframe. This method supports a
large volume of data; however it is best suited for small to moderate
(100 to 5,000 cases) amounts of data. Its advantages are the
elimination of tapes and their associated problems, and direct
transfer of data from State to OCSE and vice versa. It should be
noted that if the State intends to upload or download data, it will
need a copy of the SIMPC communications software. (See Exhibit Z.)
If a State is currently unable to download and upload to its own
mainframe, then file transfer is most appropriately applied to data
that originates from a PC. Thus, file transfer may be a better
solution in FPLS processing than for Tax Refund Offset.
5. On-Line Query - This option enables States to query cases
submitted by their State to see if a collection has been made, and
update processed, or to just review the case. Please note that only
individual State information is available. If you believe that there
is activity on that case by another State, you must call the Special
Collections Unit. (See EXHIBIT Z).
SCHEDULE FOR 1995 PROCESSING YEAR
4TH WEEK OF JUNE:
FOR THOSE STATES WHO ISSUE THEIR OWN NOTICES, OCSE WILL PROVIDE
ADDRESSES TO THE STATES FOR THOSE 1994 PROCESSING YEAR CASES WITH NO
COLLECTION. THIS WILL ASSIST THOSE STATES IN BUILDING UP THEIR
ADDRESS FILE IN ORDER TO SEND OUT THE PRE-OFFSET NOTICES.
MAY 23 - JULY 6:
TEST TAPE SUBMITTAL PERIOD
ALTHOUGH STATES HAVE UNTIL JULY 6 TO SUBMIT THE TEST TAPE TO
OCSE, WE STRONGLY SUGGEST THAT WE RECEIVE THE TAPES BY JUNE 15. ALL
CASES OCSE RECEIVES BY THIS DATE WILL BE SENT TO IRS FOR PROCESSING
DURING THE WEEK OF JUNE 20. STATES WILL
RECEIVE THE RESULTS AND ADDRESSES DURING THE FIRST OR SECOND WEEK OF
JULY WHICH WILL GIVE STATES MORE TIME TO ANALYZE RESULTS AND CORRECT
ERRORS FOR THE FINAL SUBMITTAL. IN ADDITION, THOSE STATES WHO ISSUE
THEIR OWN NOTICES WILL HAVE MORE TIME TO PROCESS THE ADDRESS
THOSE CASES THAT IRS RETURNS AS UNACCOUNTABLE DURING THE TEST
TAPE PERIOD WILL BE SENT TO THE SOCIAL SECURITY ADMINISTRATION (SSA)
TO BE RUN THROUGH THE ENUMERATION VERIFICATION SYSTEM (EVS). OCSE
WILL RETURN ANY CORRECTED SSN'S TO THE STATE. ALL STATES ARE
STRONGLY ENCOURAGED TO TAKE ADVANTAGE OF THIS OPPORTUNITY AND CORRECT
THE SSN FOR THE FINAL SUBMITTAL FOR TAX OFFSET. FOR THOSE STATES WHO
FAIL TO TAKE ADVANTAGE OF THE TEST TAPE PROCESS, THE SAME ROUTINE
WILL BE FOLLOWED FOR CASES SUBMITTED IN SEPTEMBER AND DECEMBER.
HOWEVER, WE SUGGEST THAT YOU SUBMIT DURING THE TEST TAPE PERIOD IN
ORDER TO GET THE CASES SUBMITTED FOR OFFSET IN SEPTEMBER OR DECEMBER.
CASES SUBMITTED AFTER JUNE 15 WILL NOT BE SENT TO IRS UNTIL THE
WEEK OF JULY 11TH, AND THE RESULTS WILL NOT BE SENT TO THE STATES
UNTIL THE WEEK OF JULY 25th.
CUT-OFF DATE TO RECEIVE MONIES FOR PRE-OFFSET NOTICES ISSUED BY
OCSE BASED ON ESTIMATED CASELOAD. FOR THE 1995 PROCESSING YEAR,
PLEASE USE THE ESTIMATED COST OF $.32 PER CASE SUBMITTED. PLEASE
REMEMBER THAT AN AFDC AND NON-AFDC CASE FOR THE SAME PERSON ARE
CONSIDERED TWO DIFFERENT CASES.
IV-D DIRECTOR'S CERTIFICATION REGARDING PRE-OFFSET NOTICES DUE
TO REGIONAL OFFICES. REGIONAL OFFICES MUST REVIEW PRE-OFFSET
EARLIEST DATE FOR SUBMITTING 1995 FINAL SUBMITTAL TAPES TO OCSE.
STATES TO PROVIDE INFORMATION FOR OFFSET NOTICE. EXHIBITS R, S,
M, AND X.
STATES MUST PROVIDE INFORMATION FOR ELECTRONIC FUND TRANSFERS.
LOCAL ADDRESS TAPES DUE TO OCSE. EXHIBIT X CERTIFICATION MUST
BE INCLUDED. PLEASE NOTE THAT A STATE'S FINAL SUBMITTAL TAPE CANNOT
BE PROCESSED UNTIL WE HAVE RECEIVED AND PROCESSED THE LOCAL ADDRESS
TAPE. PLEASE NOTE THAT IT IS A REQUIREMENT OF IRS THAT EACH ADDRESS
CONTAIN THE WORDS "CHILD SUPPORT". EACH YEAR MANY STATES CONTINUE TO
ONLY PUT "CSE" OR MANY TIMES NOTHING AT ALL. IRS REQUIRES US TO GO
THROUGH EACH ADDRESS AND CHANGE ANY THAT MAY NOT MEET THEIR
REQUIREMENT. SINCE THIS IS QUITE TIME CONSUMING, THIS YEAR
IF ADDRESSES ARE NOT CORRECT, OCSE MAY REQUIRE A NEW TAPE FROM
THE STATE OR POSSIBLY TELL IRS TO USE THE STATE
ADDRESS ON ALL NOTICES FOR THAT STATE. PLEASE HAVE THE TAPE DUMPED
AND THE ADDRESSES CHECKED BEFORE SENDING THEM TO OUR OFFICE.
FINAL SUBMITTAL TAPES FOR 1995 DUE FROM STATES THAT HAVE OCSE
ISSUE THEIR PRE-OFFSET NOTICE. TAPES ALSO DUE FROM STATES WHO ISSUE
THEIR OWN NOTICES, BUT WISH TO BE INCLUDED IN THE EARLIER FILING
DATE. THERE WILL BE NO EXTENSIONS. OCSE
MUST SUBMIT CASES TO IRS FOR ADDRESSES, AND MUST ABIDE BY IRS'
SEPTEMBER 21 - OCTOBER 31:
PROCESSING YEAR 1995 PRE-OFFSET NOTICES MAILED BY OCSE.
(NOTICES MUST BE MAILED BY OCTOBER 31). APPROXIMATELY 2 MILLION
NOTICES MUST BE MAILED DURING THIS TIME SO PLEASE REVIEW ALL TAPES
FOR ACCURACY BEFORE SUBMITTAL.
OCTOBER - DECEMBER 6:
PHASE I FOR 1995 UPDATES (PROCESSED AGAINST OCSE MASTER FILE
BEFORE FINAL REFERRAL TO IRS). PLEASE REMEMBER THAT STATES WHO
SUBMIT AFTER THE SEPTEMBER 16TH DEADLINE, (THOSE STATES WHO MAIL
THEIR OWN PRE-OFFSET NOTICES, AND CHOSE THE NOVEMBER 29 DEADLINE
INSTEAD OF THE SEPTEMBER 16TH DEADLINE), SHOULD NOT BE SENDING IN
UPDATES SINCE WE HAVE NO MASTER FILE OF CASES TO PROCESS THESE
UPDATES AGAINST. STATES WHO CHOOSE THE LATER SUBMITTAL DATE ARE
RESPONSIBLE FOR PROCESSING ALL UPDATES INHOUSE BEFORE THE FINAL
SUBMITTAL TAPE IS SENT TO OCSE.
PY1995 FINAL SUBMITTAL TAPES DUE FROM STATES ISSUING THEIR OWN
PHASE II BEGINS FOR PY1995 UPDATES. THESE UPDATES WILL BE
PROCESSED AGAINST THE IRS DEBTOR MASTER FILE. HOWEVER, PLEASE
REMEMBER THAT NO PROCESSING IS DONE AT IRS FROM APPROXIMATELY THE
SECOND WEEK IN DECEMBER UNTIL APPROXIMATELY THE THIRD WEEK IN
JANUARY. CASES SENT FOR UPDATE DURING THIS TIME ARE HELD BY OCSE
UNTIL THE FIRST UPDATE AT IRS IN LATE JANUARY. STATES SHOULD BE
TRACKING ALL UPDATES FORWARDED TO OCSE DURING THIS TIME BECAUSE THE
RESULTS WILL BE CONSOLIDATED INTO ONE REPORT TO THE STATE.
WEEK OF DECEMBER 12:
OCSE CERTIFICATION TAPE DUE TO IRS.
CUT-OFF DATE FOR REPORTING PY1994 MODIFICATIONS/DELETIONS FOR
CURRENT PROCESSING YEAR. NO CUT-OFF FOR STATE PAYMENTS, HOWEVER
THESE TOO WILL BE HELD UNTIL FURTHER PROCESSING IN JANUARY.
JANUARY - 3RD WEEK:
IRS FLAGS CASES FOR POTENTIAL OFFSET. FIRST UPDATE FOR CASES
ACCEPTED BY IRS (THOSE THAT HAVE BEEN HELD SINCE DECEMBER 7).
FEBRUARY - DECEMBER:
MONTHLY COLLECTION REPORTS TO STATES.
The following is a narrative description of the major reports.
1. Test Tape Report
Purpose - This report is produced in two parts as a result
of a Test Tape processing. Part I will contain
systems errors e.g., invalid SSN, name, State
Code, and arrearage. Part II will show records
not matched on SSN and/or name on the IRS
taxpayer master file. The errors may be
corrected by the State Agency and included in the
certified (final) submittal.
Schedule - Reports will be produced during June and
2. Certified (Final) Submittal Edit/Validation Report
Purpose - This report is produced as a result of a State
Certified tape being run through OCSE edit
processing program. The report provides
individual error messages and summary statistics.
Schedule - Reports will be produced during October and
November and mailed directly to the requesting
State IV-D Agency. (See EXHIBIT H for tape
3. Modification/Deletion/State Payment Report
Purpose - This report is produced in two parts, the first
part provides individual error messages of
unsuccessful update attempts and the second
provides an audit trail of successful
modifications, deletes and/or State payments.
Modification and deletes processed after December
11 may be reported as successful against the
Master File, however, the tax return may have
been processed prior to receipt of the update.
(See EXHIBIT I for tape specifications.)
Schedule - Reports will be produced during the update cycle,
from November 1 throughout the processing year.
4. Modification/Deletion Report to Transfer State
Purpose - This report will be issued to the Transfer State.
The cases included on his report can be either
cases that have been transferred for
administrative review, but are being UPDATED BY
the submitting State; or cases that have been
transferred for administrative review and are
being updated by the transfer State. (Hard copy
only.) Also all successful updates submitted by
the Transfer State will be reported to the State
which originally submitted the case.
Schedule - Reports will be produced during the update cycle,
from November 1 throughout the processing year.
5. Certification Report
Purpose - This report is produced as a result of the IRS
Certification run. The report will show a
detailed listing of all cases matching the IRS
Master File. These cases have been flagged by
IRS for potential offset. (See EXHIBIT J for
Schedule - This report will be produced after the IRS
master file is flagged. This flagging activity
should occur during the 3rd or 4th week of
The report will be provided to the State during
the latter part of February.
6. Unaccountable Report (No Match)
Purpose - This report is to provide the IV-D agency with a
list of cases not matching the IRS master file.
(See EXHIBIT K for tape specifications.)
Schedule - This report will be produced upon receipt of the
unmatched file from IRS. This activity should
occur during the 4th week of January.
7. Address/Collection/Adjustment Report
Purpose - This is to report all offset cases with the
dollar amount collected. This report will be
used by the IV-D agency to reconcile and
distribute monies received from the Public Health
Service. This report will also be used by States
for billing purposes as a detailed listing of
cases offset. This Report also provides the
current tax filing address for the cases offset.
(See EXHIBIT L tape specifications.)
Schedule - The report is to be produced monthly from the
time of the initial IRS offset through the last
IRS processing cycle (approximately February
8. Collection/Adjustment Report to Transfer State
Purpose - This is to report offsets made on cases which
have been transferred to the State with the order
for an administrative review. This report should
serve to assist States in determining whether
they are entitled to incentives (hard copy).
Schedule - The report is to be produced monthly from the
time of the initial IRS offset.
9. Name Change Report
Purpose - This report is to provide the IV-D Agency with a
list of cases in which the name reported on the
tax return form was not exactly the same as the
name submitted by the State.
Schedule - The report is produced monthly in conjunction
with the collection report.