Intercepting Tax Refunds To Collect Child Support
Ben Franklin said that in this world nothing is certain but death and taxes. The federal government is well aware of this certainty, and that is one reason why Congress granted child support collection agencies the power to intercept the tax refunds of parents who owe child support. Interception of tax refunds for nonpayment of child support is not a complicated subject.
Tax refund interception basics
The program that was established to intercept the tax refunds of parents who owe past-due child support is technically referred to as the Federal Tax Refund Offset Program. You might want to think of the tax refund collection process as an interception program, rather than an offset program. An interception sounds more daring and proactive than a dull, lifeless offset. If you are able to tell someone that you intercepted a tax refund, you will feel that you have actually accomplished something, rather than just having the past-due child support offset against the payor's tax refund. Why not characterize it as an accomplishment?
The tax refund interception program is administered by the IRS, the Federal Office of Child Support Enforcement and the State Child Support Enforcement agencies. The program has been a very effective means of collecting past-due child support.
How to participate in the tax refund interception program
To be eligible for the program, you must be owed delinquent child support. Child support is considered delinquent for purposes of the interception program if the payor is three months behind in child support payments. There is also a threshold amount of child support that must be owed before you can take advantage of the program. If you receive Aid to Families with Dependent Children (AFDC) payments, you must be owed at least $150 in delinquent child support before the payor's tax refund may be intercepted. If you do not receive AFDC payments, the threshold amount is $500. One of the benefits of tax refund interception is that it is not limited by state boundaries. A tax refund may be intercepted to pay past-due child support no matter where in the United States the payor lives.
If you meet the threshold requirements, it is easy to get your case submitted for participation in the tax refund interception program. You need only contact a child support enforcement agency caseworker and make certain that the agency has the payor's name and Social Security number and knows the amount of past-due support owed. The agency is required to submit all cases, both AFDC and non-AFDC to the IRS. If you know the payor's address, you should also provide it to the agency so that it can notify the payor of the pending tax refund interception. This notification is required.
Once the payor is notified he or she will have the right to challenge the interception by submitting evidence that the child support has been paid, or that an incorrect amount is shown as due. However, it is rare for a payor who challenges the interception to have the amount intercepted reduced or eliminated.
The mechanics of tax refund interception
Experience has probably taught you that when the government is involved, things do not happen overnight. This is especially true when you are dealing with a federal agency, the IRS and a state agency. Therefore, you need to have patience when waiting for word on whether any money has been intercepted from the payor's tax refund.
The IRS processes tax returns from February through December and simply determines whether the payor is owed a tax refund. If so, an amount of money equal to the past-due child support is taken out of the refund and sent to the Federal Office of Child Support Enforcement. This office then forwards the money to the state child support enforcement office.
In AFDC cases, the state will keep most, if not all, of the money to reimburse itself for the money it paid to you. In non-AFDC cases, the entire amount is paid to you. If you received AFDC in the past, but no longer receive it, the state will keep an amount necessary to repay itself for any AFDC you were paid. The remainder, if any, is then paid to you. Typically, it will take three to five weeks from the time the IRS processes the payor's tax return until your state receives the money. The state may hold the intercepted tax refund money for several months if it involves a non-AFDC case and a joint tax return.
Your state may charge a fee for processing a tax refund interception. This is especially true in non-AFDC cases. This fee cannot be more than $25.
The timing of a request for a tax refund interception is important. Remember that April 15 comes only once a year, so make certain that your caseworker has the necessary information well before that date. In fact, it is a good idea to inquire as to whether there is a deadline for making requests for a tax refund interception.
Intercepting a tax refund is a great way to collect past-due child support. Its drawback, of course, is that many payors are either unemployed, or are employed and pay little or no taxes. You simply cannot intercept a tax refund if no tax refund is owed to the payor. Your best strategy, if you have a payor who is not paying taxes, is to try to get the payor into tax-paying status. This not only carries the benefit of a possible tax refund interception but also creates the likelihood of a wage withholding order.
If the payor is self-employed, you stand virtually no chance of collecting past-due child support through an interception of a tax refund. The reason for this is that a self-employed person usually makes estimated tax payments to the IRS every few months. These payments usually do not meet the payor's total tax burden for the year and the payor must then pay an amount to the IRS by April 15 to cover his or her entire tax obligation. In short, a self-employed person usually doesn't have a tax refund to intercept. Don't waste your time trying to intercept a tax refund if you have a self-employed payor. Your collection efforts are better directed toward other methods of obtaining payment.
Finally, if you suspect that the payor is employed, but no taxes are being withheld from his or her paycheck, consider reporting the employer to the IRS. Employers are required to withhold taxes and a failure to do so could subject them to civil or criminal penalties. Usually, if an employer fails to withhold taxes, it is because the payor and the employer are friends and the employer is doing the payor a favor by preventing the payment of taxes and a possible interception of a refund. Don't accept any explanations from the payor for the lack of tax withholding, such as, "I'm an independent contractor," or, "I'm exempt from withholding." The law applies equally to all employers, and if you suspect that your payor is being given a favor by an employer/friend, don't hesitate to go to the IRS and request that it check out the situation.
Collecting Child Support, Gregory C. Damman, J.D.
Copyright © 1997 Self Counsel Press