Collection of Child Support by the IRS through Federal Income Tax Refunds Offset, 1996
Date: August 15, 1996
TO: STATE AGENCIES ADMINISTERING CHILD SUPPORT ENFORCEMENT PLANS APPROVED UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER INTERESTED INDIVIDUALS.
SUBJECT: Collection of Child Support by the Internal Revenue Service (IRS) through offsetting Federal income tax refunds. This Action Transmittal applies to those cases in which the State has an assignment of support rights under section 402(a)(26) or 471(a)(17) of the Social Security Act, or cases in which the State is enforcing the support obligation pursuant to section 454(6) of the Social Security Act, or the State has an assignment of medical support rights under section 1912(a)(1)(A) of the Social Security Act.
ATTACHMENT: Instructions for submitting requests for Collection of Child Support Debts by the IRS through the Federal tax refund offset process.
BACKGROUND: During 1981, 1982, 1983, 1984, 1985, 1986, 1987, 1988, 1989, 1990, 1991, 1992 and 1994 the Office of Child Support Enforcement (OCSE) issued instructions to define the procedures States must use for the preparation, submission, and processing of cases for collection by offsetting past-due child support obligations with Federal income tax refunds (OCSE AT-81-19, 81-29, 82-14, 83-14, 84-05, 85-07, 86-15, 87-6, 88-12, 89-13, 90-06, 91-05 and 92-03). This Action Transmittal supersedes these documents and outlines the revised procedure for the submitting and processing of cases.
SUPERSEDED MATERIAL: OCSE-AT-94-05 DATED August 23, 1994.
INQUIRIES TO: OCSE Special Collections Unit, (202) 401-9389
David Gray Ross
Office of Child Support Enforcement
FEDERAL TAX REFUND OFFSET PROGRAM
On August 13, 1981 the Federal Tax Refund Offset Program was enacted by Congress (see section 2331, P.L. 97-35). This unique use of a Federal collections mechanism to recover delinquent child support debts involves the interaction of all State IV-D agencies and two Federal agencies (OCSE and IRS). This cooperative effort has resulted in total collections of over $6.4 billion since the Program began. As of March 1996, over 10.4 million tax refunds were intercepted since the Program started offsetting refunds in 1982.
In November 1990, the President signed into law the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508), which made changes to the Federal Tax Refund Offset Program for non-AFDC cases. Section 5011(b) authorizes the use of the Federal Income Tax Refund Offset process in non-AFDC cases for the collection of past-due spousal support when the parent is living with the child and spousal support and child support are included in the same order. In addition, cases may be submitted where there is past-due support due on behalf of adult disabled children for whom there is a support order in effect. These changes took effect January 1, 1991.
I. SUBMITTING CERTIFIED REQUESTS
A. ELIGIBLE CASES
Only IV-D cases are eligible for tax refund offset. In other words, only cases in which the State has an assignment of support rights under section 402(a)(26) or 471(a)(17) of the Act, or cases in which the State is enforcing the support obligation pursuant to section 454(6) of the Act, or the State has an assignment of medical support rights under Section 1912(a)(1)(A) of the Social Security Act, can be submitted for tax refund offset. All States must have and use procedures for tax refund offset in non-AFDC as well as AFDC and foster care cases. Under Section 303.72 of the Program Standards Regulations which became effective in October 1990, all cases which meet the criteria for submittal must be submitted for offset. A custodial parent who has applied for IV-D services (and paid the application fee) may be charged an additional fee, not to exceed $25, for this service. Some States which recover costs of services directly from the custodial parent, pursuant to 45 CFR 302.33(d)(ii), deduct this fee from the tax refund when it is intercepted. It is not necessary to obtain the consent of the non-AFDC custodial parent before submitting the case. Custodial parents seeking tax refund offset services should be advised that their application for IV-D services will necessitate other enforcement action by the IV-D Agency. For example, if the arrearage equals or exceeds the amount of support payable for 1 month, and if the noncustodial parent's place of employment is known, wage withholding is mandatory. To assist IV-D agencies in collecting sufficient background information and properly informing applicants for IV-D services concerning the Tax Refund Offset Program, OCSE has developed a Non-AFDC Federal Tax Refund Offset Information Form (see EXHIBIT T). Whether or not this form is used, the IV-D Agency should ensure that applicants for non-AFDC services understand:
- what the applicant must pay for tax refund offset;
- how long it may be before an offset is distributed (including the possibility of a 6-month delay in joint return cases);
- that any State submitting an assigned arrearage for offset must receive its share of the refund before IRS is permitted to offset an unassigned arrearage; and
- that any payment the family receives may have to be returned to the IV-D Agency if there is an adjustment within 6 years following the end of the tax year. (The Tax Reform Act of 1986 extended the Injured Spouse Claim and Allocation Form 8379 filing period from 3 years to 6 years.)
In addition, the custodial parent, in all tax refund offset cases, may be required to sign an affidavit attesting to the amount of the child support arrears if the agency cannot verify the amount owed using its records.
B. CRITERIA FOR SUBMITTAL
States must certify (see EXHIBIT A: TRANSMITTAL CERTIFICATION) that cases meet the following requirements to be eligible for the Federal Tax Refund Offset Program. Requirements for eligibility for AFDC/foster care and non-AFDC/Medicaid-only cases are quite similar. However, for the sake of clarity and since the cases must be submitted separately, the requisite criteria are listed individually for each classification.
1. AFDC AND FOSTER CARE CASES
- The support obligation must have been established under a court order or an order of an administrative process established under State law and must have been assigned to the State pursuant to section 402(a)(26) or 471(a)(17) of the Act.
- The amount past-due must not be less than $150.00.
- The amount owed must have been delinquent for 3 months or longer. The requirement that past-due support must be at least 3 months in arrears is met if the past-due support is 3 months over-due as of January 1.
- The delinquency is for support and maintenance of a child, or of a child and the parent with whom the child is living (maintenance includes medical support, but only if a specific dollar amount is included in the order).
- The State IV-D Agency has verified the accuracy of the arrears, has a copy of the order and any modifications and has a copy of the payment record or an affidavit signed by the custodial parent at testing to the amount of support owed. The State IV-D Agency has verified the accuracy of the noncustodial parent's name and Social Security Number (SSN). In interstate cases the request may be made only by a State which has taken an assignment under section 402(a)(26) or 471(a)(17) of the Act.
2. NON-AFDC AND MEDICAID-ONLY CASES
- The support obligation must have been established under a court order or an order of an administrative process established under State law and the State must be enforcing the order under section 454(6) of the Act. Medicaid-only cases, required to be enforced under section 454(5)(B) of the Act, are treated as section 454(6) cases, and are subject to the following requirements.
- The amount of past-due support must not be less than $500.00.
- At State option, amounts certified in non-AFDC cases may be limited to past-due support which accrued since the State IV-D Agency began to enforce the support order.
- The support must be owed to or on behalf of a minor child. Past-due support due adult handicapped children may be collected through the Federal income tax refund offset process if there is a support order in effect for the child and the child, while a minor, was determined to be disabled under Title II (Federal Old-Age, Survivors, and Disability Insurance Benefits Program) or Title XVI (Supplemental Security Income for the Aged, Blind, and Disabled program) of the Social Security Act.
- Non-AFDC and Medicaid-only cases may be submitted on behalf of a parent when the parent is living with the child and spousal support and child support are included in the same support order.
- The State has verified the accuracy of the arrears, has a copy of the order and any modifications, and has a copy of the payment record or an affidavit signed by the custodial parent attesting to the amount of support owed.
- The State has checked its records to see if there are AFDC or foster care arrearages.
- The State IV-D Agency has verified the accuracy of the noncustodial parent's name and SSN.
- The State IV-D Agency must have the custodial parent's current address.
Past-due support may not include fees or court costs or any other non child support debts owed to the State or to the family. Past-due support may include medical support, but only if a specific dollar amount is included in the order. Interest may be included in the amount certified for offset only if it is considered support under State law. Certifications for offset in AFDC and foster care cases may include an amount for support and maintenance of a child, or of a child and the parent with whom the child is living. Spousal support is eligible for certification in non-AFDC and Medicaid-only cases in which the parent is living with the child and spousal support and child support are included in the same support order. Non-AFDC and Medicaid-only referrals on behalf of an individual who is no longer a minor even if the arrearage accrued while the person was a minor child may not be submitted for offset, except in cases in which past-due support is due on behalf of adult disabled children for whom there is a support order in effect and the child, while a minor was determined to be disabled under Title II or XVI. In other words, the child must be a minor as of December 31 of the year in which that case is submitted to OCSE for offset.
The State may not submit a case in which the noncustodial parent or his or her spouse has filed for bankruptcy under Chapters VII, XI, XII, & XIII of Title 11 of the United States Code. The State may not submit such cases "unless the automatic stay under section 362 of the Bankruptcy Code has been lifted or is no longer in effect with respect to the individual owing the obligation... and the obligation was not discharged by the bankruptcy proceeding." If the State does submit a case in this category, IRS will not offset any refund, or in the event of an offset will reverse the offset.
C. SUBMITTING INTERSTATE CASES
The State submitting past-due support for offset must inform any other State involved in enforcing the support order when it submits an interstate case for offset and when it receives the offset amount from IRS. If the debt submitted is based upon another State's support order, the submitting State may find it necessary to communicate with the other State for purposes of verification of arrears or to obtain a copy of the order or the payment record prior to submittal for refund offset.
In a non-AFDC interstate case, the State in which an application for IV-D services has been filed pursuant to section 302.33 (i.e., the initiating State), must submit the past-due support for offset. It is necessary to specify which State must submit past-due support owed in non-AFDC cases for offset to avoid both States submitting the same arrearage. The initiating State is in the best position to pay the custodial parent any amount offset quickly and to handle any necessary adjustments to the amount of offset based on an amended tax return.
If a State submits a case for refund offset on the basis of another State's child support order, the submitting State should comply with the other State's laws regarding refund offset. Several States have been involved in litigation which has resulted in the imposition of specific safeguards to prevent the wrongful interception of taxpayers' refunds. These requirements for an expanded notice and hearing procedures may affect the enforcement of any child support order issued within the State. The regulations providing for administrative review in either the submitting State or the State which issued the order (45 CFR 303.72(g)) (upon request by the taxpayer) appear to have eliminated most problems in this area. States conducting administrative reviews should not delete cases submitted by another State simply because they would not have been submitted, for policy reasons, by the State with the order.
D. INTERSTATE TRANSMITTAL FORM
OCSE has developed an interstate transmittal form to facilitate communication and coordination between States regarding child support enforcement efforts, especially wage withholding and tax refund offset. It has been designed for use in obtaining and/or verifying information for the purpose of submitting a case for offset when the order and/or pay record for the noncustodial parent are in another State. It can also be used as a transfer document when the case is being referred to the State with the order for the purpose of conducting an administrative review. In such cases the submitting State should provide the certified arrearage, not the current arrearage; and, if there are
cumulative orders, which serve as the basis for the submittal, it should be clearly indicated that the forum State need only verify a portion of the amount submitted for offset. Likewise, the State with the order can use the form for reporting the results of the administrative review to the State that submitted the case for offset. (See EXHIBIT U for the Child Support Enforcement Interstate Transmittal.)
E. CASE SUBMITTALS
It is important that all submittals be as accurate as possible, both at the time of issuing the pre-offset notice and when the tape is sent to IRS. In order to ensure that States include all case updates prior to issuance of the pre-offset notice, tapes received by OCSE prior to the designated date will be returned to the State for further processing and no priority for collection will be granted until such date.
Since the expansion of the Offset Program to non-AFDC families, it is possible for a State to submit the same SSN twice, once for assigned arrears and once for non-AFDC and Medicaid-only. When submitting cases involving the same SSN, States should include on the tape only one record reflecting combined local requests for AFDC/foster care cases, and one record reflecting combined local requests for non-AFDC and Medicaid-only cases. Duplicate AFDC or foster care case submittals or duplicate non-AFDC and Medicaid-only case submittals from a State will not be accepted. Therefore, both the AFDC/foster care case and the non-AFDC and Medicaid-only case (with the greatest arrearage) will be accepted and all others will be rejected. Each State must combine its duplicate cases in either category and submit them as one case for offset. States should submit one consolidated file on magnetic tape to OCSE with a completed certification. However, multiple tape submissions will be accepted from a State provided that each submission is accompanied by a completed certification. Multiple tape submissions should only occur if time does not permit the State to merge all local requests into a single submission or if the State lacks the capability to merge data onto magnetic tape. It is important to the ultimate effectiveness of the Program that States take the time to review their final case submittals.
Every time a record is submitted to OCSE for processing, i.e., final submittals or updates, the State must indicate whether the transaction pertains to an AFDC/foster care case (A) or to a non-AFDC/Medicaid-only case (N). Every update and State payment must also contain the corresponding processing year. Any records not containing this information will be rejected. (See EXHIBIT N for Tape Submission Requirements.) Any record submitted that does not contain the case type indicator will be rejected. Likewise, all reports issued by OCSE will include a case type indicator for each record, as well as the appropriate processing year.
If there are multiple submittals for the same noncustodial parent from more than one State, the first tape certified to OCSE will receive priority for collection. After this initial priority, satisfaction of State claims is based on the amount of the delinquency (from highest to lowest). All arrears assigned under either 402(a)(26) or 471(a)(17) will be satisfied before any non-AFDC delinquency can be offset. It should be noted that other Federal debts in addition to back taxes may be offset by interception of tax refunds. IRS debts have first priority over all other offsets. AFDC and foster care arrearages come next, followed by all other Federal debts, and non-AFDC child support arrearages including Medicaid-only cases.
F. EDIT VALIDATION
Each State submission will be processed through an Edit Validation program prior to acceptance for forwarding to IRS. The State will receive an Edit Validation Report which indicates types of errors and percentage of errors. OCSE will analyze these statistics and make the final decision as to what corrective actions, if any, will be taken. Possible actions include:
- Tape returned to State for correction and resubmit (if time permits);
- Errors corrected by OCSE; or
- Errors rejected (not correctable).
Detailed tape instructions and specifications are contained in Exhibit H.
G. SUBMISSION DATE
The deadline date for final case submittal is dependent upon whether OCSE or the State issues the pre-offset notice. For States requesting OCSE to send their pre-offset notices, all requests for offset must be received by OCSE by the date listed on the schedule. It is imperative that States meet this deadline so OCSE can ensure that case submittals are processed prior to the IRS deadlines. States issuing their own pre-offset notices have until the later date listed to submit their final offset requests, but only if the State certifies by IV-D Director's signature, that notices for the prior processing year were mailed by October 31 and that notices for the current processing year will be mailed by October 31. In-house updates will not be processed from those States submitting at the later date. Please make sure that the tape is accurate at submittal time. A State which issues its own pre-offset notice can nonetheless submit by the earlier date and thus remain competitive in terms of priority listing for multiple-state case submittals. Detailed tape instructions and specifications are contained in EXHIBIT B.
H. SUBMITTING TEST CASES TO OCSE
State Agencies are accorded one opportunity to test the accuracy of the case records and to correct errors prior to the submission deadline for certified cases. This one-time test submission should ensure that cases will not be lost during offset processing due to errors that could have been corrected prior to the certified submission. The cases submitted will be processed through the OCSE Edit-Validation program with results being returned to States (Exhibit H). Cases passing the edit will then be forwarded to IRS for a test match on the Taxpayer Master File. In addition to this processing, all cases that come back from IRS as unaccountable because name and SSN do not agree - Code 20, will be sent to the Social Security Administration to be run against the Enumeration Verification System (EVS). These cases will be run against "system 220" which will correct those SSNs that may be off slightly or have a transposition, thus causing it to reject. The results (Exhibit K) of this processing will be sent to the State so that any corrections may be made before final submittal time. This process will also be done at the end of the final submittal processing. States may use these results to correct cases for the next processing year. Please submit all new cases from your State to ensure more accurate final submittals from your State. Furthermore, if the test tape results in new addresses from IRS (Exhibit P), it will assist OCSE during the issuance of pre-offset notices. That is, it will minimize the time and effort that would otherwise be required in October.
States will receive a Test Tape Unaccountable Report (Exhibit K) which will indicate matching errors at IRS due to problems with the noncustodial parent's name or SSN. Agencies may then correct their case records before submitting the certified (final) tape.
The total number of test cases and the total amount of arrearage should be provided with the submittal. The Test Tape may be submitted to OCSE during the scheduled time frame. No Test Tapes will be accepted after the deadline (see EXHIBIT B). Although States have until the final date to submit the Test Tape to OCSE, it is strongly suggested that the tapes be submitted by the date given for the end of the first batch. This is because all cases OCSE receives by this date will be sent to IRS for processing so States will receive the results and addresses during the first or second week of July giving 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 in order to issue notices. Cases submitted after the earlier deadline will not be sent to IRS until approximately the second week of July and the results will not be sent to the States until the last week of July.
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:
- The right to contest the State's determination that past-due support is owed or the amount of past-due support submitted;
- 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
- The procedures and timeframe for contacting the IV-D Agency 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 (see Exhibit DD). 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."
Section 212 of the Social Security Act Amendments of 1994, Public Law 103-432, requires States to have procedures for periodically submitting cases with support arrearages that exceed $1,000 and are at least two months old to consumer reporting agencies (see EXHIBIT C). 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) 96). For processing year (PY) 97, the cost for the service will be approximately $.41 per notice. The actual amount will be collected through the grant process on OCSE-131 or by check in January 1997. See AT-96-01 dated October 30, 1995 and supplemental instructions in Dear Colleague letter DC-96-32 dated June 24, 1996. The procedures are as follows:
- States requesting OCSE to issue their pre-offset notices are to furnish the information to OCSE as requested in EXHIBIT AA by June 28.
- Information provided must include an estimate of the number of cases for offset which will be submitted for the processing year. 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 June.
- The States will be billed for the actual amount owed in December 1996. For those States who pay by check, payment is to be made in January 1997. (The dollar amount will be determined by the actual number of pre-offset notices mailed times the cost per notice, 41 cents.) The check should be made payable to the Office of Child Support Enforcement, and should cite appropriation number 75X1536. For those States that require a Federal Tax I.D., the number is 53-019-6960. The CAN # is G995123.
- If a check is received by OCSE, States will receive a letter of acknowledgment.
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. Local addresses and phone numbers that have changed or have been added during the current processing year should be submitted to OCSE. Both the local address and local phone number have to be submitted even though only one of them has changed. Do not submit entire file.
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 a local address or telephone number changes, States should notify OCSE in writing of the change (Exhibit W). 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. (See Exhibit X.) IRS is requiring each State to submit only addresses and telephone numbers that have changed. This form (see EXHIBIT S) must be returned by each State for both local and State address/telephone changes. Maintaining accurate address and telephone information is extremely important and it is imperative that States provide correct information. Changes should be made by each State throughout the year as they occur and submitted to OCSE.
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 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 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 electronically (e.g. Connect:Direct/Network Data Mover (NDM), via personal computer (PC) or on tape using the format in EXHIBIT N. (See EXHIBIT Z for details on updating cases by PCs.) We are encouraging States not to use the MITRON transmission method. 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 by PC, tape, or electronically, 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.
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.
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.
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.
III. UPDATES TO CASE SUBMISSIONS
OCSE has implemented a new process whereby States are able to transmit update case data to OCSE electronically (e.g. Connect:Direct/NDM) (Refer to Dear Colleague letter (DC-96-20) dated April 12, 1996.) The use of personal computers is still available. A software program using a full screen data entry system has been developed which will allow States to enter deletes, modifications, transfers, and State payments on a PC to be transmitted to OCSE for processing. This should be particularly beneficial during weeks in which the volume of updates is low, thus eliminating the need to create a tape. Although OCSE strongly encourages States to transmit updates electronically, if the State has not implemented this process into their system then OCSE encourages that they use the personal computer method in order to expedite reporting. (See EXHIBIT Z for details regarding procedures and specifications for personal computers.)
A. DELETIONS AND MODIFICATIONS
For both AFDC/foster care and non-AFDC/Medicaid-only cases, submittals received by the early deadline can be updated for deletions or decreases in arrearage amounts from that deadline throughout the entire processing year. For those using the later submittal deadline, updates will be accepted starting after that deadline and lasting throughout the processing year. Requests for case updates cannot be processed for the purpose of deleting or modifying amounts on the pre-offset notice. Updates received at OCSE by the scheduled date from those States using the earlier deadline will be processed against the OCSE master file before forwarding the cases to be flagged for offset by IRS. As in the past, OCSE strongly urges that updates be submitted before OCSE sends the consolidated file to IRS for flagging. The extended submittal deadline only allows for State internal update processing prior to final submittal to OCSE. Early update submission assures case correction before cases are forwarded to IRS for potential flagging for offset.
Cases received after the OCSE deadline will be marked on the OCSE master file and forwarded to IRS on a weekly basis once the cases have been flagged on the IRS Master File. This means that effectively, cases received between early December and approximately the third week in January will not be processed at IRS until after IRS has flagged the cases on the master file, which usually occurs towards the end of January. It is important that States recognize this time gap in processing. OCSE strongly encourages States to maintain a list or file of all updates referred to OCSE during this time for tracking purposes. In the beginning of February OCSE will return a report to States indicating the results of the updates. This report should be matched against the list or file maintained at the State to ensure that all updates were successful. It should not be assumed that because the case was deleted or modified on the State's records or system, that the update was successful at IRS. Furthermore, problems occasionally occur in that OCSE does not receive an update tape from the State for one reason or another. Here again, it is imperative that each State monitors what updates have been forwarded to OCSE to ensure processing. Such quality control of cases should continue throughout the entire processing year. To ensure that cases are not inadvertently deleted, please verify large volumes of deletes, especially at the beginning of the processing year.
To assist States' efforts to monitor update processing, a brief summary of the processing schedule is provided. Beginning at the end of January, every Wednesday, OCSE creates a weekly update file to be sent to IRS electronically. These updates are processed at IRS over the weekend. The results of IRS processing are usually received at OCSE on the following Monday and processed by us the next day. On the following day OCSE sends the update results to States by mail or electronically. At this time the State should make sure that the number of cases sent to OCSE matches the results received. (See Exhibit I).
Each State should be reminded again that IRS does not accept duplicate transaction types per case within the same weekly batch. In other words, if the State reports two modifications for a case in the same batch, IRS will accept only the first modification rejecting the second. If, however, a taxpayer has been submitted for both an AFDC/foster care arrearage and a non-AFDC/Medicaid-only arrearage there is no problem in updating both cases in the same batch. OCSE will edit the data prior to referral to IRS. If duplicate modifications are submitted for the same case, OCSE will accept the lowest modification. If, however, duplicate State payments are submitted, the first one will be accepted with the duplicate being rejected.
Update transactions can be fully effective only if they are submitted to IRS prior to the processing of the individual's tax return. Therefore, it is vital to the success of the offset process that States submit updates as early and as frequently as possible. OCSE will forward updates on a weekly basis to IRS for processing.
States should not submit modifications/deletions as the result of an offset from the IRS. The arrearage amount is automatically decreased by the offset amount at the time of offset. A modification in this case would, in effect, reduce the arrearage amount of the offset.
It is important to point out that in all cases where a taxpayer has requested an administrative review, regulations require that an update must be submitted if the review results in a deletion of, or decrease in, the amount referred for offset. 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. The mandatory update following the administrative review is required regardless of the magnitude of the reduction in the amount referred for offset.
For cases where there has been no request for an administrative review, States are required to notify OCSE of any decrease in or elimination of an amount referred for collection by Federal tax refund offset if the decrease is significant according to State guidelines. If an administrative review has been conducted, any deletions or decreases must be reported to OCSE.
Updates must be submitted either on magnetic tape or, through a personal computer or electronically. Use the record format specified in EXHIBIT N. Position 73 reflects transaction type i.e., D,S,M,L or T. Transaction type L may be used by submitting States to change the local code on a certain case throughout the year should the need arise. The submission must include a signed request for update of transmittal (see EXHIBIT E) clearly labeled "STATE UPDATES TO TAX OFFSET." Also, each record must indicate whether it is an AFDC/foster care or a non-AFDC/Medicaid-only case. Each individual update case must also be identified by processing year. Updates should be mailed to the same address as the original submission. (See EXHIBIT B for shipping and handling instructions.) All tapes or cartridges received at OCSE should be properly labeled as to what is on them. A transmittal should also accompany each tape or cartridge with the exact number of deletes, modifications, transfers and/or State payments on the tape or cartridge.