And if that’s not enough to get what’s owed, Oregon and other states’ child support officials get the U.S. Treasury’s assistance in collecting those delinquent family financial payments.
It’s a given that raising children is an expensive endeavor. When parents split up, that financial burden is shared. That continues, ideally, even when couples split.
In those cases, one parent often is held legally responsible for providing funds to the other who has main custody of the youngsters. The payments typically last until the children are legal adults.
When the paying parent is delinquent on child support, the various governments involved in the process can act to get the money.
Oregon parents counting on child support will get some new legal help starting next year.
The state’s recently enacted Senate Bill (SB) 184 will require employers to include independent contractors in their child support reporting requirements to the Oregon Division of Child Support of the Department of Justice. Currently, reporting requirements apply only to an employer’s employees.
But, note attorneys at Jackson Lewis P.C., for all new engagements or re-engagements entered into on or after on Jan. 1, 2024, employers will be required to include in their child support reports any independent contractors hired as well.
Federal tax implications: Obviously, the Beaver State new child support law will affect parents paying child support in that state.
Oregon, like the other 49 states, has its own procedures and penalties on how to handle unpaid child support. The collection options include garnishing income, suspending licenses, placing a lien on real property, and taking the money out of tax refunds.
And Uncle Sam also gets involved at tax-filing time with that last collection effort in cases nationwide when parents miss their court-ordered child support payments.
Old debts eat into current refunds: Officially, these paid-from-refund amounts are known as offsets.
The U.S. Treasury, which is boss to the Internal Revenue Service, is able to hold part or all of federal taxpayers’ refunds to pay outstanding debts, both federal and state.
The offset process is handled by the aptly-named Treasury Offset Program, or TOP, which is run by the Treasury’s Bureau of the Fiscal Service, BFS.
Congress has authorized BFS via TOP to use part or all — that’s worth repeating: part or all — of a tax refund to pay certain other debts. This means, pardon my acronym French, such taxpayers are SOL (or, in more family-friendly acronym translation, simply outta luck).
Debts that can be collected from federal tax refunds include:
- Federal tax debts, such as prior federal income tax you didn’t pay.
- Federal agency debts, like a delinquent student loan.
- State income tax obligations.
- Past-due child and spousal support.
- Certain unemployment compensation debts owed to a state.
The program has been successful. In fiscal year 2022, TOP recovered more than $2.3 billion in child support obligations. That money went from the federal government to state agencies and then to the parents to whom the money was owed.
The offset collection process: In the case of delinquent child support, state agencies alert the Health and Human Services Office of Child Support Enforcement (OCSE), which reports the certified overdue amounts (along with the debtor’s name and Social Security number, to the U.S. Treasury.
When Treasury processes tax refunds, it checks the OCSE data for those who owe past-due support and intercepts all or part of the tax refund. Treasury then sends the intercepted or offset funds through OCSE to the state child support agency to pay the past-due support.
It works basically the same with other creditor agencies at all levels, such as the Department of Education when it comes to unpaid student loans or state tax departments when filers don’t pay at that level.
In all cases, federal or state agencies submit their delinquent debts as payment vouchers to BFS for collection and inclusion in TOP.
The creditors’ vouchers must certify that such debts qualify for collection offset and must contain information about the payment, including the Tax Identification Number (TIN) and name of the recipient.
Using this info, TOP officials compare the refund payment information with debtor information that’s stored in BFS’ delinquent debtor database. Where a refund recipient’s TIN and name match that of a debtor cited on a submitted voucher, TOP offsets — withholds — payment — tax refund — to satisfy the debt.
Just how much is offset from a tax refund is, per the TOP’s words, “to the extent legally allowed.” In some cases, Treasury can take tax refund money to pay all of a qualifying unpaid debt. In other, only a percentage or the money due can be taken from a tax refund.
A debtor stays in the TOP database until the state or federal agency that sent the debt to the TOP database tells TOP to stop collecting the debt. That could be because the debt has been paid in full, the debt is subject to a bankruptcy stay, or if other reasons justify pausing or stopping collection.
Look for the notice: Either way, the offset bite to a tax refund can be a big, unwelcome surprise.
However, it shouldn’t have been.
Part of the offset process requires the BFS to send affected taxpayers a notice alerting them that it is taking part or all of their federal refunds to pay other debts.
The notice will list the original refund and offset amounts. It will also include the agency that received the offset payment and its contact information.
If you didn’t get a notice, call the BFS’ TOP center toll-free at (800) 304-3107. If you are deaf, hard of hearing, or have a speech disability, dial 7-1-1 to access telecommunications relay services (TRS).
Your rights as a debtor: As with other issues involving Uncle Sam’s handling of your money, for example your taxpayer rights when dealing with the IRS, you also have rights when it comes to refund offsets.
The TOP notice must explain these rights and opportunities that the taxpayer has to dispute the debt that records indicate are owed. This includes the right to examine and request copies of agency records regarding the debt.
You also can request an administrative review of the determination of indebtedness.
Or you can negotiate a compromise payment deal or set up a repayment plan acceptable to the agency to which you owe the money.
And if you believe you don’t owe the debt or you want to dispute it, don’t contact the BFS or IRS. They are just the collection agents. You need to go to the debtor, the agency that sent the offset requite to TOP.
You also might find these items of interest:
- What to do if your tax refund is wrong
- Don’t deposit a wrong IRS refund check
- 5 tests a child must meet to be your tax dependent
- Determining child-related tax breaks when you’re divorced
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