{ "id": "IN11322", "type": "CRS Insight", "typeId": "INSIGHTS", "number": "IN11322", "active": true, "source": "EveryCRSReport.com", "versions": [ { "source": "EveryCRSReport.com", "id": 622949, "date": "2020-04-24", "retrieved": "2020-04-24T22:08:20.117806", "title": "The Child Support Federal Tax Offset of CARES Act Economic Impact Payments ", "summary": "The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136, enacted March 27, 2020) includes direct payments to individuals in 2020\u2014referred to by the Internal Revenue Service (IRS) as \u201ceconomic impact payments\u201d ($1,200 per adult/$2,400 per couple filing a joint return; $500 for dependent children). These payments are structured as tax credits automatically advanced to households that meet certain criteria. Receiving a recovery rebate in 2020 will not affect a taxpayer\u2019s 2020 income tax liability or tax refund, and taxpayers will generally not need to repay the rebate. \nSection 2201(d) of the CARES Act provides that these payments cannot be offset for past due debts to federal agencies, past due state income tax debt, or unemployment compensation debt, but it does not exempt those payments from offset for past-due child support for cases enforced by the Child Support Enforcement (CSE) program. This Insight briefly summarizes how the CSE federal tax refund offset mechanism generally operates and the guidance provided by the Office of Child Support Enforcement (OCSE) and the Department of the Treasury for the offset of these direct payments. \nOverview of the CSE Federal Tax Offset \nAll 50 states, the District of Columbia, Guam, Puerto Rico, the Virgin Islands, and 60 tribal nations operate CSE programs pursuant to Title IV-D of the Social Security Act. The program is federally administered by OCSE in the Administration for Children and Families (Department of Health and Human Services). The program is estimated to handle the majority of all child support cases; the remaining cases are handled by private attorneys, collection agencies, or through mutual agreements between parents. In FY2018, the program served 14.7 million children (about 20% of children in the United States) and collected an estimated $34 billion in child support, of which $7.7 billion was for obligations that were past-due (\u201carrears\u201d). The amount of arrears paid were about 7% of the $118.1 billion in cumulative arrears owed to cases enforced by the program.\nOne of the enforcement methods available to the CSE program for collecting past-due support is intercepting federal income tax refunds pursuant to Section 464 of the Social Security Act, and Section 6402(c) of the Internal Revenue Code. For a refund to be subject to the \u201ctax offset,\u201d the child support arrears owed by a child support obligor (which may be combined from multiple cases for the same obligor) must be at least \n$150 for cases where the custodial family receives cash payments under the Temporary Assistance for Needy Families (TANF) program or where the child receives assistance through the IV-E foster care program, or\n$500 for all other types of child support cases (\u201cnon-TANF\u201d or \u201cMedicaid-only\u201d). \nIn FY2018, the tax offset mechanism is estimated to have yielded $1.6 billion in collections. \nThe tax offset mechanism, which is part of the Federal Collections and Enforcement Program, operates through a partnership between OCSE and the Department of the Treasury. According to OCSE, after it transmits to the Treasury information on qualifying obligors, those obligors are sent a Pre-Offset Notice that includes the amount of arrears that are owed at that time of the notice and how to contest that amount. When the Treasury ultimately processes the refund and intercepts the past-due support, it notifies the obligor of the offset and sends the funds to the relevant state child support program via OCSE. The amount that is offset may be based on more up-to-date information about the arrears that are owed than the amount listed in the Pre-Offset Notice.\nWhen the state CSE program receives the offset\u2014usually within two or three weeks of the intercept\u2014it may wait to disburse the funds for up to six months from when they were withheld from a joint tax return because the portion of the refund owed to the \u201cnon-obligated\u201d spouse may be recouped. (Non-obligated spouses may file an Injured Spouse Allocation Form 8379 with the IRS, either with the tax return or after the offset has occurred.)\nCollections from the tax offset are subject to the normal distribution rules that apply to CSE collections. For custodial families that have never received TANF cash assistance, the funds generally go to the family. Collections made on behalf of current TANF families are assigned to the state and generally retained to reimburse the state and federal government for the cost of assistance. For former TANF families where past-due support is owed both to the family and the state (from the time that the family received TANF benefits), a state may opt to pay support owed to the family prior to recouping any amount owed to the state (referred to as \u201cfamily first\u201d rules). According to the National Child Support Enforcement Association, only a few states and territories distribute tax refund collections for former TANF families under this option, meaning that \u201cnearly all states and territories continue to apply such refunds to any state-assigned debt before past-due support owed to the family.\u201d\nCARES Act Economic Impact Payments\nOCSE and the Treasury have confirmed that these payments are generally subject to CSE tax offset procedures, including the minimum amount of past-due support that is required for the offset to occur (see above). The entire economic impact payment may be offset up to the amount of the child support debt owed. \nAdditional guidance has been provided for situations where the Economic Impact Payment is received jointly with a spouse who does not owe the child support debt. In such cases, in order to receive their portion of the payment, those spouses may file an Injured Spouse Allocation Form 8379. In cases where individuals who are married filing jointly already included Form 8379 with their 2019 tax filing (or 2018 filing if the 2019 return has not been filed), half of the total Economic Impact Payment will be sent to the non-obligated spouse; only the obligated spouse\u2019s half of the payment will be offset for the past-due support. In these cases, the Treasury directs \u201cthere is no need to file another injured spouse claim for the payment.\u201d", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/IN11322", "sha1": "09168f69abca622dfdab186adee66a14f3852986", "filename": "files/20200424_IN11322_09168f69abca622dfdab186adee66a14f3852986.html", "images": {} }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/IN11322", "sha1": "c31ad9cd6b24601ce71f3147406c2d7b9ae2b691", "filename": "files/20200424_IN11322_c31ad9cd6b24601ce71f3147406c2d7b9ae2b691.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4798, "name": "Child Support & Family Formation" } ] }, { "source": "EveryCRSReport.com", "id": 622388, "date": "2020-04-15", "retrieved": "2020-04-16T12:33:42.551178", "title": "COVID-19 and Direct Payments to Individuals: Federal Tax Offset for Past-Due Child Support", "summary": "The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136, enacted March 27, 2020) includes direct payments to individuals in 2020\u2014referred to by the Internal Revenue Service (IRS) as \u201ceconomic impact payments.\u201d These payments are structured as tax credits automatically advanced to households that meet certain criteria. Section 2201(d) of the CARES Act provides that these payments cannot be offset for past due debts to federal agencies, past due state income tax debt, or unemployment compensation debt, but it does not exempt those payments from offset for past-due child support for cases enforced by the Child Support Enforcement (CSE) program. \nAs of the date of this Insight, the federal Office of Child Support Enforcement (OCSE) and the Department of Treasury each has provided public guidance related to the applicability of tax offset procedures to these payments. This Insight provides a brief summary of how the CSE federal tax refund offset mechanism generally operates, and historical background on how it was used to withhold past-due child support from similar direct payments to individuals\u2014the 2008 IRS economic stimulus payments. According to OCSE, the offset of these payments resulted in an additional $863 million in collections in processing year 2008, which was an 88.4% increase relative to 2007. The offset of CARES Act direct payments to individuals might also be expected to result in increased collections for past-due child support though the CSE program.\nOverview of the CSE Federal Tax Offset \nAll 50 states, the District of Columbia, Guam, Puerto Rico, the Virgin Islands, and 60 tribal nations operate CSE programs pursuant to Title IV-D of the Social Security Act. The program is federally administered by OCSE in the Administration for Children and Families (Department of Health and Human Services). The program is estimated to handle the majority of all child support cases; the remaining cases are handled by private attorneys, collection agencies, or through mutual agreements between parents. In FY2018, the program served 14.7 million children (about 20% of children in the United States) and collected an estimated $34 billion in child support, of which $7.7 billion was for obligations that were past-due (\u201carrears\u201d). The amount of arrears paid were about 7% of the $118.1 billion in cumulative arrears owed to cases enforced by the program.\nOne of the enforcement methods available to the CSE program for collecting past-due support is intercepting federal income tax refunds pursuant to Section 464 of the Social Security Act, and Section 6402(c) of the Internal Revenue Code. For a refund to be subject to the \u201ctax offset,\u201d the child support arrears owed by a child support obligor (which may be combined from multiple cases for the same obligor) must be at least \n$150 for cases where the custodial family receives cash payments under the Temporary Assistance for Needy Families (TANF) program or where the child receives assistance through the IV-E foster care program, or\n$500 for all other types of child support cases (\u201cnon-TANF\u201d or \u201cMedicaid-only\u201d). \nIn FY2018, the tax offset mechanism is estimated to have yielded $1.6 billion in collections. \nThe tax offset mechanism, which is part of the Federal Collections and Enforcement Program, operates through a partnership between OCSE and the Department of the Treasury. According to OCSE, after it transmits to the Treasury information on qualifying obligors, those obligors are sent a Pre-Offset Notice that includes the amount of arrears that are owed at that time of the notice and how to contest that amount. When the Treasury ultimately processes the refund and intercepts the past-due support, it notifies the obligor of the offset and sends the funds to the relevant state child support program via OCSE. The amount that is offset may be based on more up-to-date information about the arrears that are owed than the amount listed in the Pre-Offset Notice.\nWhen the state CSE program receives the offset\u2014usually within two or three weeks of the intercept\u2014it may wait to disburse the funds for up to six months from when they were withheld from a joint tax return. Non-obligated spouses may file an Injured Spouse Allocation Form 8379 with the IRS in order to recoup their portion of the refund. \nTax Offset and the 2008 IRS Economic Stimulus Payments\nThe Economic Stimulus Act of 2008 (P.L. 110-185, enacted February 13, 2008), provided for direct payments to individuals that, like those in the CARES Act, were also structured as advanced refundable tax credits (\u201ceconomic stimulus payments\u201d). Nothing in the act exempted these payments from the tax offset provisions under Internal Revenue Code Section 6402, including those that apply in cases of past-due child support. An OCSE Dear Colleague Letter (February 22, 2008) clarified that the payments would be subject to the tax offset. Guidance in a subsequent OCSE Dear Colleague Letter (March 17, 2008) provided additional information (excerpted below):\nIRS is mailing two notices regarding the economic stimulus payments. They will begin mailing the first notice, \u201cEconomic Stimulus Payment Notice,\u201d in early March. It will inform the recipient of the stimulus payments and when payments will begin.\nThe second notice will ... advise how much the recipient should expect to receive and when the payment should arrive.\nThe time frame for issuing stimulus payments will be May \u2013 September 2008. OCSE expects to begin receiving offsets from the stimulus payments as early as mid-May.\nStimulus payments will be treated like any other tax offset refund.\nInjured Spouse Claims (Form 8379) will be calculated at up to 50 percent of the eligible amount of the stimulus payment prior to offset, regardless of the percentage of income claimed by the unobligated spouse for tax year 2007.\nThe unobligated spouse will not be required to file an additional Form 8379 to receive their portion from the stimulus payment if they already filed an injured spouse claim against money offset from tax year 2007. IRS will automatically calculate up to 50 percent of the eligible amount of the stimulus payment prior to offset.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/IN11322", "sha1": "88070fdf955c8ca02d878cb5d5058a196c1fed98", "filename": "files/20200415_IN11322_88070fdf955c8ca02d878cb5d5058a196c1fed98.html", "images": {} }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/IN11322", "sha1": "f4521f9499da037c0e190d5abf42188395f7e82c", "filename": "files/20200415_IN11322_f4521f9499da037c0e190d5abf42188395f7e82c.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4798, "name": "Child Support & Family Formation" } ] }, { "source": "EveryCRSReport.com", "id": 622104, "date": "2020-04-09", "retrieved": "2020-04-11T23:02:29.620308", "title": "COVID-19 and Direct Payments to Individuals: Federal Tax Offset for Past-Due Child Support", "summary": "The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136, enacted March 27, 2020) includes direct payments to individuals in 2020\u2014referred to by the Internal Revenue Service (IRS) as \u201ceconomic impact payments.\u201d These payments are structured as tax credits automatically advanced to households that meet certain criteria. Section 2201(d) of the CARES Act provides that these payments cannot be offset for past due debts to federal agencies, past due state income tax debt, or unemployment compensation debt, but it does not exempt those payments from offset for past-due child support for cases enforced by the Child Support Enforcement (CSE) program. \nAs of the date of this Insight, the federal Office of Child Support Enforcement (OCSE) has not provided public guidance as to the offset procedures that are to be used for these payments. To provide context for the process that ultimately is used, this Insight provides a brief summary of how the federal tax refund offset mechanism currently operates, and historical background on how it was used to withhold past-due child support from similar direct payments to individuals\u2014the 2008 IRS economic stimulus payments. According to OCSE, the offset of these payments resulted in an additional $863 million in collections in processing year 2008, which was an 88.4% increase relative to 2007. The offset of CARES Act direct payments to individuals might also be expected to result in increased collections for past-due child support though the CSE program.\nOverview of the CSE Federal Tax Offset \nAll 50 states, the District of Columbia, Guam, Puerto Rico, the Virgin Islands, and 60 tribal nations operate CSE programs pursuant to Title IV-D of the Social Security Act. The program is federally administered by OCSE in the Administration for Children and Families (Department of Health and Human Services). The program is estimated to handle the majority of all child support cases; the remaining cases are handled by private attorneys, collection agencies, or through mutual agreements between parents. In FY2018, the program served 14.7 million children (about 20% of children in the United States) and collected an estimated $34 billion in child support, of which $7.7 billion was for obligations that were past-due (\u201carrears\u201d). The amount of arrears paid were about 7% of the $118.1 billion in cumulative arrears owed to cases enforced by the program.\nOne of the enforcement methods available to the CSE program for collecting past-due support is intercepting federal income tax refunds pursuant to Section 464 of the Social Security Act, and Section 6402(c) of the Internal Revenue Code. For a refund to be subject to the \u201ctax offset,\u201d the child support arrears owed by a child support obligor (which may be combined from multiple cases for the same obligor) must be at least \n$150 for cases where the custodial family receives cash payments under the Temporary Assistance for Needy Families (TANF) program or where the child receives assistance through the IV-E foster care program, or\n$500 for all other types of child support cases. \nIn FY2018, the tax offset mechanism is estimated to have yielded $1.6 billion in collections. \nThe tax offset mechanism, which is part of the Federal Collections and Enforcement Program, operates through a partnership between OCSE and the Department of the Treasury. According to OCSE, after it transmits to the Treasury information on qualifying obligors, those obligors are sent a Pre-Offset Notice that includes the amount of arrears that are owed at that time of the notice and how to contest that amount. When the Treasury ultimately processes the refund and intercepts the past-due support, it notifies the obligor of the offset and sends the funds to the relevant state child support program via OCSE. The amount that is offset may be based on more up-to-date information about the arrears that are owed than the amount listed in the Pre-Offset Notice.\nWhen the state CSE program receives the offset\u2014usually within two or three weeks of the intercept\u2014it may wait to disburse the funds for up to six months from when they were withheld from a joint tax return. Non-obligated spouses may file an Injured Spouse Allocation Form 8379 with the IRS in order to recoup their portion of the refund. \nTax Offset and the 2008 IRS Economic Stimulus Payments\nThe Economic Stimulus Act of 2008 (P.L. 110-185, enacted February 13, 2008), provided for direct payments to individuals that, like those in the CARES Act, were also structured as advanced refundable tax credits (\u201ceconomic stimulus payments\u201d). Nothing in the act exempted these payments from the tax offset provisions under Internal Revenue Code Section 6402, including those that apply in cases of past-due child support. An OCSE Dear Colleague Letter (February 22, 2008) clarified that the payments would be subject to the tax offset. Guidance in a subsequent OCSE Dear Colleague Letter (March 17, 2008) provided additional information (excerpted below):\nIRS is mailing two notices regarding the economic stimulus payments. They will begin mailing the first notice, \u201cEconomic Stimulus Payment Notice,\u201d in early March. It will inform the recipient of the stimulus payments and when payments will begin.\nThe second notice will ... advise how much the recipient should expect to receive and when the payment should arrive.\nThe time frame for issuing stimulus payments will be May \u2013 September 2008. OCSE expects to begin receiving offsets from the stimulus payments as early as mid-May.\nStimulus payments will be treated like any other tax offset refund.\nInjured Spouse Claims (Form 8379) will be calculated at up to 50 percent of the eligible amount of the stimulus payment prior to offset, regardless of the percentage of income claimed by the unobligated spouse for tax year 2007.\nThe unobligated spouse will not be required to file an additional Form 8379 to receive their portion from the stimulus payment if they already filed an injured spouse claim against money offset from tax year 2007. IRS will automatically calculate up to 50 percent of the eligible amount of the stimulus payment prior to offset.", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/IN11322", "sha1": "cbb6d59d85cbe1ede02e6270434a1f7cf03cd708", "filename": "files/20200409_IN11322_cbb6d59d85cbe1ede02e6270434a1f7cf03cd708.html", "images": {} }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/IN11322", "sha1": "995382e25ddfb99cce9283f8b3cb222d521a4099", "filename": "files/20200409_IN11322_995382e25ddfb99cce9283f8b3cb222d521a4099.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4798, "name": "Child Support & Family Formation" } ] } ], "topics": [ "CRS Insights" ] }