Enforcement: Intercepting Federal Tax Refunds

Criteria        Who Gets the Tax Refund?        Timing        Holds

Criteria

Federal tax refunds are intercepted if the case meets all three conditions below:

1. The past-due amount owed meets or exceeds the threshold [the threshold: the amount owed to the family is $500 or more on a court case, OR is $150 or more if any part of the past-due amount is owed (assigned) to the state.]
   • Note: Because of the "timing" differences between when KIDS charges the monthly obligation and when KIDS posts payments, KIDS subtracts one month's support obligation before determining if the past-due amount meets the threshold. KIDS will not certify the amount for federal tax intercept until the obligation amount meets or exceeds the threshold.
2. The child support agency knows the Social Security number or Tax Identification number of the parent who owes the past-due support.
3. The case gets case management services (child support services) from a local child support agency.

If the three conditions above are met, the paying parent is "certified" for federal tax intercept. When certified for federal tax intercept for $2,500 or more, the parent cannot get a passport or have a passport renewed until the entire debt is paid in full.

Who Gets the Federal Tax Refund?

Intercepted federal income tax refunds first pay past-due support and debts that are assigned, and then pays past due support owed to the family.

New: If the family no longer gets cash benefits, and no birth costs or AFDC debts are owed, the family will get the intercepted federal income tax refund.

If more than one family is owed past-due support

The intercepted tax refund is $300. The parent owes $500 in past-due support to Family A & owes $750 in past-due support to Family B.

• The debt to Family A is 40% of the past-due support. Family A would receive $120 (40% of $300).
• The debt to Family B is 60% of the past-due support. Family B would receive $180 (60% of $300).

If the tax refund is more than the debt amount

The paying parent owes $600 in past-due support.  The parent's federal tax refund is $800. After paying the $600 in past-due support, the remaining $200 is sent to the paying parent.

Timing

The IRS takes the past-due support out of the paying parent’s federal tax refund. The U.S. Treasury will mail a letter to the paying parent stating the amount intercepted and where the money was sent. The Trust Fund usually gets the tax intercept four to five weeks after the paying parent receives the U.S. Treasury letter.

Holds

• Refunds intercepted from federal joint refunds are held for six months. The hold protects the parent who receives the money from having to repay intercepted refunds if the IRS changes the refund. This hold does not guarantee that the IRS will not recall the intercepted refund at a later time. After the six-month hold, the Trust Fund sends the money to the parent receiving support (to the parent's debit card or direct deposit account).
  
  The paying parent gets an immediate credit for the payment.
  
  
• Refunds intercepted from federal non-joint refunds are not held.

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