Action Transmittal AT-94-05 - Part 5


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

Continued:

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.

VIII.  REPORTING

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 
formatted, etc. 




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

JUNE 15:

     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 
INFORMATION.

     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.

JULY 15:

     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.



JULY 15:

     IV-D DIRECTOR'S CERTIFICATION REGARDING PRE-OFFSET NOTICES DUE 
TO REGIONAL OFFICES.  REGIONAL OFFICES MUST REVIEW PRE-OFFSET 
NOTICES.

AUGUST 26:

     EARLIEST DATE FOR SUBMITTING 1995 FINAL SUBMITTAL TAPES TO OCSE.

AUGUST 26:

     STATES TO PROVIDE INFORMATION FOR OFFSET NOTICE.  EXHIBITS R, S, 
M, AND X.

     STATES MUST PROVIDE INFORMATION FOR ELECTRONIC FUND TRANSFERS.  
EXHIBIT BB.

     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.

SEPTEMBER 16:

     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' 
SCHEDULE.

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.

NOVEMBER 29:

     PY1995 FINAL SUBMITTAL TAPES DUE FROM STATES ISSUING THEIR OWN 
PRE-OFFSET NOTICE.

DECEMBER 7:

     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.

DECEMBER 16:

     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     
                    July.

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 
                    specifications.)

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 
                    tape specifications.) 

     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 
                    January.

                    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 
                    through December).

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.