Tax refund intercepts for child support

Federal law requires non-custodial parent’s taxes be intercepted to pay delinquent child support.

The Debt Collection Improvement Act of 1996 was enacted into law on April 26, 1996, to authorize the Secretary of the Treasury to collect past-due child support by the offset of Federal payments. The procedure is codified at 42 U.S.C. § 664.

In addition to federal tax intercepts, the State of North Carolina also intercepts state tax refunds to pay delinquent child support. N.C. Gen. Stat. § 105A establishes a procedure by which debts owed to state agencies are deducted from state tax refunds. N.C. Gen. Stat. § 105A-1 (1995).

Tax intercept triggers

Non-custodial parents (NCP) who owe more than $150 in child support arrears ($500 for those cases where the parent did not receive public assistance) are subject to a tax intercept of their federal tax refunds unless excluded by Davis vs. NC Department of Human Resources, 349 N.C. 208, 505 S.E.2d 77 (1998). Non-custodial parents who owe more than $50 in arrears are subject to tax intercept of state taxes unless excluded by the Davis decision. Davis holds that a NCP who is in compliance with a court-ordered repayment plan for arrearages should not be certified for Federal tax intercept (offset), even if a debt of past paid assistance is still owed.

The Federal Income Tax Refund Offset program is operated by the U.S. Department of Treasury’s Financial Management Service and the State Income Tax Refund Offset program is operated by the N.C. Department of Revenue.

Notification

Before a tax intercept occurs, the non-custodial parent is notified. On or about 30 September of each year, a Pre-Offset Notice is sent to non-custodial parents who are listed for federal tax intercept that includes certified arrearage amounts. An NCP has thirty days from the date of the notice to appeal.

NCPs receive a notice informing them of the total arrearages that are being certified for tax intercept. If current support has not been satisfied when state income taxes are intercepted, current support is paid first and then arrearages are credited with any remaining amount.

The spouse of an NCP may file IRS form 8379 Injured Spouse Claim and Allocation Form with the IRS to protect their rights as to any federal refund.

Appeals

After the agency receives the tax intercept, it is required under N.C. Gen. Stat. § 105A-8 to notify the debtor it has intercepted the tax refund. The notice must inform the debtor that the debtor has the right to contest the matter by filing a request for a hearing, the time limits and procedure for requesting the hearing. Read a petition for a contested case hearing under N.C. Gen. Stat. Ch. 105A, N.C. Gen. Stat. § 110-140 and 45 C.F.R. 303.72.

Resolution

While a non-custodial parent who has his or her tax refund intercepted should appeal if the certified arrearage amount is incorrect, winning the appeal does not bring permanent closure to the issue. The Administrative Law Judge’s ruling is not binding on future garnishments. For complete and final closure, the NPC should consider a declaratory judgment action to determine the arrears or other action that will be binding on future determinations.