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Treasury Offset ProgramNASC PRESENTATION
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What is TOP?
TOP = Treasury Offset Program
A centralized process that intercepts federal payments of payees who owe delinquent debts to federal and state agencies
Offset is withholding funds payable by the United States to a person to satisfy a debt owed to the United States or a State
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What is TOP
Statutes and Regulations for Administrative Offset (offset of federal payments to collect state debts) 31 U.S.C. 3716 and 31 CFR 285.6
Statutes and Regulations for State Payment Offset (offset of state payments to collect federal no-tax debts) State law, 31 U.S.C 3716 (h), any state regulations and 31
CFR 285.6
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What is TOP?
TOP is one of the largest and most effective tools in collecting delinquent debts for federal and state agencies: Debts owed to the United States (tax & non-
tax) Child support obligations enforced by state
agencies State income tax debts State debts (pilot to begin Spring 2007)
Collections total over $3 billion per year
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What is TOP?
TOP is a system that compares payments with debts
Payment and debt comparisons are made on the basis of Name and Federal Identification Number
When a match occurs the payment is offset to collect the debt
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TOP
All debts have a 10 year statute of limitations
Debt must be at least $25*
* This is the minimum TOP will accept, but dollar amount could be set higher for certain programs
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Due Process
Notice Intent to offset 60 days to dispute the debt
Any state law requirements
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As of June 30, 2006
TOP database contains…
$36.2 billion in federal non-tax debts $86.1 billion in child support debts $129.4 billion in federal tax debts $5.7 billion in state income tax debts
Total $257 billion
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Priority of Debts in TOP
• IRS income tax debts
• Child support debts assigned to states under Temporary Assistance to Needy Families program
• Federal non-tax debts
• Other child support debts
• State income tax debts
When more than one debt is submitted for the same debtor, TOP applies funds collected in accordance with priorities set by statute and policy
and applies offset funds in the following order:
NOTE: If a debtor has two or more debts of the same priority, TOP applies funds to the oldest debt first
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TOP – Transmission Method
Batch Processing Connect:Direct
Dataline from creditor agency to FMS Connect:Mailbox
Manual process using modem to transmit files to FMS
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Agreement to Certify Debts
This agreement lets FMS know that you will follow the Due Process rules for submitting debts electronically to TOP All debts are true and collectible Are delinquent, valid, and legal Are not in bankruptcy or foreclosure
Debts are certified for
life of debt Agreements are done annually in December for all new debt to
be loaded in the upcoming calendar year
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Vendor Offset Notice
Sent by FMS Date and amount of offset, Agency to which money is sent,
contact point at agency
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TOP Process
PAYMENTS
TOPDatabase
DEBTS
Does payee name &TIN match debtor
name & TIN?
No
Yes
Check or EFTto payee
$$ to creditoragency
Notice to debtor
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Debt Management Operations Center
Operates the National TOP Call Center
Callers are referred to states/agencies for Account balances Specific debt information Removal from TOP Adjustments or refunds
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Fees
Fees- A fee will be charged to the state for each offset ($22).
The amount of the fee will be added to the debt amounts and may be adjusted annually for FMS to recover the Federal cost of the program.
The state may include a fee for each debt forwarded to Financial Management Services or the fee can be added to the amount of the state debt at FMS.
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Test Results State Debts Offset by TOP
Offset Category
FEDERAL PAYMENT AMOUNT
AMOUNT OFFSET
NUMBER OF PAYMENTS
OFFSET
Admissions & Amusements
51,377.76 9,061.05 30
Central Collection 1,557,326,841.23 1,479,410.87 1,067
Corporate Tax 5,211,598.74 259,864.60 85
Motor Carrier 396,285.00 33,444.18 1
Fuel Tax 352 127.89 1
Individual Taxes 2,583,635.91 288,990.90 442
Sales & Use 23,997,046.84 569,647.00 246
Withholding 100,244,032.55 4,757,725.89 1,341
$1,689,811,170 $7,398,272 3,213
Federal vendor payments for the month of September 2006. Feds indicated this was a low volume month.
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Programs for States
States can participate in the Treasury Offset Program two ways:
State Income Tax Program Federal tax payments may be offset to collect state income
tax debts (debtor must reside in state)
Reciprocal Agreement
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System Set-up Requirements
Review legislation Reciprocal Agreement Agency submits TOP Agency Profile Form Agency submits TOP Security Access Request
Form for each user FMS tests system with agency Agency submits certification agreement Agency submits certified debts to FMS
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Chapter 577 of 2006 Laws (House Bill 448)
Added Section 13-930 to Tax-General Article, Annotated Code of Maryland.
Authorizes Comptroller to withhold tax refunds and other state payments for liabilities held by Treasury.
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Chapter 577 of 2006 Laws (House Bill 448)
Allows Comptroller to certify state tax due to Treasury.
Permits Treasury to withhold vendor payments for remittance to Comptroller.
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State Reciprocal Agreement
Legal references, due process, debt certification, operational requirements, fees, offset notices, fund transfers, reversals and refunds
Pilot with three states to begin Spring 2007-Maryland, New Jersey, and Kentucky
Pilot will be reviewed after one year to determine if program is mutually beneficial and cost effective
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IRS Tax Refund Intercepts
Fiscal Year 2006
30,530 federal tax refunds intercepted $21,800,000
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State Refund Intercept Statistics Fiscal Year 2006
Collection Category Count Dollar Amount
Individual 72,371 $ 33,692,391.13
Withholding 7,116 $ 4,814,632.01
Sales & Use Tax 1,669 $ 1,625,750.03
Corporation 588 $ 2,806,101.11
IRS 7,854 $ 4,852,747.68
Central Collections Unit 92,562 $ 41,019,785.53
Dept. of Human Resources (child support) 14,438 $ 7,168,580.58
Other States 687 $ 211,579.63
TOTAL $ 96,191,567.70
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Collection Statistics
Offset Category FY2005
total FY2006 total
Withholding Tax $2,385,651.07 $2,379,881.59
Sales & Use Tax $602,525.02 $750,187.65
Admission & Amusements $14,871.13 $4,436.34
Individual Tax $1,448,801.34 $1,320,479.82
Corporate Tax $236,373.61 $400,749.86
Tire Fee $2,301.07 $1,275.10
Internal Revenue Service $62,273.96 $111,904.44
Central Collection Unit $2,402,921.77 $2,337,066.44
Motor Fuel Tax Division $22,851.50 $97,232.01
Unemployment Insurance $1,151,282.49 $1,090,650.69
TOTAL $8,329,852.96 $8,493,863.94
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Current Project Status
State Debtors notified of potential TOP offset Reciprocal agreement signed Agreement to certify debts signed All TOP security and profile forms completed TOP and State ACH forms completed Modifications in process for R*STARS and
Comptroller Tax Systems
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Contact at FMS
For questions on the state reciprocal agreement pilot program, please contact:
Sarah Martin
202-874-6884
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Treasury Offset Program
Questions ???