Seizing Your Tax Refund to Pay for Child Support Arrears

Saturday, May 2nd, 2009

1. How does New Jersey Probation go about seizing a tax refund to pay off back child support?

One of the most popular way to collect past child support arrears is for Probation to “zap” your federal tax refund. This is very disheartening to the payor, but it happens quite often. The common term that is used to describe the seizing of your tax refund is called a Federal Tax Intercept.

Any processing of a tax intercept depends on when you actually filed your return. If you file close to or after the April 15th deadline, then the forwarding time for the offset can be delayed.

When the monthly mass payment is received, the State must divide the mass payment among the 21 PCSE units, and credit each payment to the correct account. Because of the large number of cases, this can take several weeks.

If you filed your tax return jointly, and if the debt is owed to the custodial parent, then the tax offset is not distributed for six months after receipt. This gives the non-obligated spouse’ the person who filed with you some time to file an amended return to prevent offset of the part of the refund that may belong to him or her.

2. How will the Federal Tax Offset be applied?

In general, the Federal Regulations require that Federal Tax Offsets be applied to any welfare debts first. If part of the debt on an account is due to welfare and part to the obligee, the full debt to welfare may be paid before any of the offset goes to the obligee.

If the person who owes support has more than one account, all debts due to welfare may be paid first. After welfare is paid, the remaining offset money is divided between the obligees, according to the amount due on each case.

3. My tax refund has been offset, and I already have paid the past due child support. How can I get my refund back?

Every two weeks, the Automated Child Support Enforcement System (ACSES) updates account information with the OCSE. In turn, the OCSE submits the updated information every two weeks to the Financial Management Service (FMS). If the FMS is notified that debt was fully paid prior to an offset, the FMS will delete the tax offset record and the refund should be sent to you directly. However, if you satisfied your debt after an offset, the FMS cannot return your refund to you directly. The refund must be sent to the Probation Child Support Office for processing. Once the local Probation Child Support Office receives your refund, then it will be sent to you.

4. How can I find out the status of my Federal Tax Offset?

For more information, you can contact the local Probation Child Support Office that handles your case, or the Administrative Office of the Courts, Child Support Enforcement Services at (609) 292-8908.

If there is a qualifying debt on a child support case in New Jersey, the NJ Department of Human Services, Division of Family Development, must submit that case to the U.S. Department of Treasury, Financial Management Service (FMS). Any Federal income tax refunds that are due to the person who must pay child support will be taken and used to pay part of the child support debt. This is called a Federal Tax Offset.

5. When is a case submitted for Federal Tax Offset?

To qualify for Federal Tax Offset, there must be a debt of $150 or more due to a welfare agency, or a debt of $500 or more due to the obligee (the person that receives the support). If there are any qualifying debts to both a welfare agency and the custodial parent, each debt will be submitted separately. There may be two submissions for the same case.

If the debt is due to the obligee, there must be a minor child involved in the case. If the debt is partially child support for a minor child and partly support for a spouse or a child who is not a minor, the full amount of the debt can be submitted. If the debt is for spousal support, or support for a child who is no longer a minor, the debt cannot be submitted for Federal Tax Offset.

All qualifying debts due to welfare or other public agencies are submitted, no matter what the age of the child or children. I have a child support debt, but I am making regular payments through income withholding.

6. Why is Probation Child Support Enforcement (PCSE) taking my tax refund?

Federal Tax Offset is required in all cases where there is a qualifying debt, even if regular payments are being made. Only a specific court order can prevent a case from being submitted for Federal Tax Offset.

The PCSE Unit cannot remove a case from Federal Tax Offset, even if the obligee requests it. If the case is payable through the local PCSE unit and the debt qualifies, it must be submitted for Federal Tax Offset.

7. Is the debt that shows on my pre-offset notice the full amount due on my case?

Not necessarily. Any money owed to welfare is separated from money due to the obligee, so you may receive two different notices. Also, certain debts cannot be submitted for Federal Tax Offset, so they will not show on the notice.

If you have more than one account with qualifying debts, the notice will indicate only one account number, but it will not add together the debts from all qualifying cases.

8. I have filed for bankruptcy. How does this affect Federal Tax Offset?

That depends on the type of bankruptcy you have filed. If you have filed a Chapter 7, the PCSE unit will stop the Federal Tax Set-off for the year that you have filed, and any past years for which the refunds or rebates have not been received and distributed. If you have filed a Chapter 13, the PCSE unit will stop the Federal Tax Set-off for the year in which you filed bankruptcy. This includes any past years in which the refunds or rebates have not yet been received and distributed and each year for the rest of the bankruptcy plan. It is important that you notify the PCSE unit that handles your case when you file
for bankruptcy.

Child support arrears are not dischargeable in bankruptcy. While filing bankruptcy may stop Federal Tax Set-off, child support arrears still exist.

9. Two states are involved in my child support case. Who submits the case for Federal Tax Offset?

If there is an order between two states, the state where the obligee lives submits the case. The name of the agency that has submitted the case for Federal Tax Offset is shown in the top right hand corner of the pre-offset notice.

10. Will I be notified before my case is submitted for Federal Tax Offset?

Selection for Federal Tax Offset is conducted on a monthly basis throughout the tax year. Pre-offset notices are sent in the month subsequent to the date of selection. These notices are sent from the Office of Child Support Enforcement (OCSE) in Washington, DC and are sent to the last address on record at the IRS.

11. What are acceptable reasons for an appeal?

A. You are not the person identified in the notice.

B. You owe less than the qualifying debt.

C. There is a current bankruptcy proceeding.

D. You have a court order specifically preventing Federal Tax Offset.

12. How can I appeal Federal Tax Offset?

You have 30 days from the date of the notice to submit an appeal. The 30-day time frame starts as of the date of the notice, not the date you actually receive it.  Any appeals must be in writing, and must be sent directly to the PCSE unit that handles your case.

To appeal, you should write a letter. It is important to state that you are appealing Federal Tax Offset, and the reason why.  Phone calls or visits to the PCSE unit that handles your case are not appeals, and will not stop tax offset.

You must send records or documents (evidence) to prove what you claim in your written appeal. Do not send originals. For example, if you claim you are not the right person, you should send a copy of your driver’s license and/or social security card. If you claim that you do not owe the amount of the qualifying debt, you should send copies of receipts, and/or checks stubs from your employer to prove that you have paid the debt.

The PCSE unit will review what you have sent, and adjust your account, if appropriate. If the PCSE unit cannot correct your account through the paperwork you sent, a hearing will be scheduled. You must appear at this hearing. If the debt is owed in an interstate case, and a hearing is necessary, you have the right to ask that the hearing be held in the state where you live. If New Jersey submitted your case for Federal Tax Offset, and you want the hearing to be in the state where you live, you should ask for that in your appeal.

13. I have filed my tax return jointly with my spouse. Can the PCSE unit take my spouse’s part of the refund?

If you file jointly, then the full amount of the refund is  available for Federal Tax Offset. If the spouse who does not have to pay child support wishes to protect his or her part of the refund from offset, that spouse should submit a Form 8379 called the Injured Spouse Claim and Allocation Form to the IRS. It is best to file an Injured Spouse Claim and Allocation Form along with the Joint-Federal Income Tax Return.

If the injured spouse wishes to waive the entire refund and have funds applied to the account please contact the PCSE unit.

The IRS will prorate the refund based on the income of each spouse. The part of the refund due to the non- obligated spouse will sent to that person, and the part of the refund due to the obligated party will be sent to the Probation Child Support Office that handles the case.

14. I have received a notice that my refund has been offset. Why hasn’t my account been credited?

Tax offsets are sent from the FMS to the State of New Jersey bi-weekly, in a single mass payment.

This article was written by Theodore Sliwinski, Esq. © Theodore Sliwinski, Esq. All Rights Reserved.
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