4025 State Tax Offset

Georgia State Seal

GEORGIA DIVISION OF FAMILY AND CHILDREN SERVICES
BENEFIT RECOVERY POLICY MANUAL

Chapter:

4025

Effective Date:

December 2019

Policy Title:

State Tax Offset

Reviewed or Updated in:

MT-11

Policy Number:

4025

Previous Update:

MT-10

Requirements

State Income Tax refunds are intercepted as payment for delinquent debts.

Basic Considerations

Claims are selected for tax offset according to the following criteria:

  • Claim status is active

  • Case is not active

  • Claim amount is $25 or more

  • Claim is delinquent

Delinquency Referral and Deletion Criteria:

  • Claims are selected on a monthly basis. A claim will be referred to State Debt Setoff (SDSO) if a monthly payment is missed and will remain in SDSO for the remainder of the calendar year (January – December).

  • The “Payment Received” date field is used in calculating if a claim is delinquent.

  • If a claim is determined to be delinquent within the calendar year, any state income tax return issued for that year will be subject to offset.

  • Once a client is referred to SDSO, a subsequent payment towards a claim will not delete the claim from SDSO until the first cycle of the following year is run.

  • Claims with a valid monthly reduction/payment posted for one full calendar year (January through December) will be deleted when the first cycle of the year is run.

The State Debt Set-Off System provides the Georgia Department of Revenue a file of individuals who have claims meeting the criteria.

As state tax returns are filed, the Revenue system identifies social security numbers designated as belonging to individuals owing a debt to the state.

The tax set-off notices are mailed to the assistance unit (AU) from the State Department of Revenue and the Office of Financial Services. The AU is notified of the intent to apply the state tax refund to a debt unless action is taken within 30 days from the date of the notice. The address and toll-free telephone number of the Office of Inspector General (OIG) are included in the notice. The individual may contact OIG during the 30-day period to request a hearing on the intent to set-off the refund. Requests must be made in writing.

Failure to request a hearing within 30 days is considered a waiver of the opportunity to contest the set-off.

During the 30-day period, the refund check is held by the Office of Financial Services pending notification of either:

  • A hearing request or

  • A decision by the county that the set-off was in error and the refund, or a portion of it should be released.

If neither action is taken, the tax refund is applied to the claim after the 30th day from the notice date.

Postings discovered to be in error after they have been applied to a debt are refunded by the county.

Hearings involving State Tax Refund offset are processed and attended by OIG staff. The Office of State Administrative Hearings (OSAH) notifies OIG of the hearing decision.

  • If the set-off is determined to be incorrect, the refund check will be released to the AU.

  • If the set-off is determined to be correct, the refund check will be applied to the claim.

Reports available for OIG use:

  • State Tax Intercept Payment report (CLM-016) provides a list of posted claim payments by AU.

  • State Tax Listing for Office of Financial Services Report (CLM-30 MLY)

County Office Procedures

DFCS and OIG coordinate to ensure that any request for information submitted by the AU is addressed.

The claim file is reviewed to determine if the set-off is incorrect because of any of the following conditions:

  • The social security number shown is incorrect.

  • The debt has been paid.

  • The obligation has been satisfied or set aside by court order.

  • The obligation has been included in bankruptcy.

  • A third party has failed to forward payments to the agency.

  • An alternative means of collection is pending.

  • The claim is assigned to the AU in error.

If the set-off is incorrect:

  • Notify the Office of Inspector General that the set-off needs to be corrected.

  • If the error is discovered before posting and all or part of the offset should be returned to the recipient, notify the recipient that the Office of Financial Services will refund the offset.

If a hearing is requested:

  • An Office of Inspector General staff member will represent the agency at the hearing.

  • The state treasury offset remains pending until the Office of State Administrative Hearings makes a decision.

  • The Office of State Treasurer refunds the offset if the court determines the offset is incorrect or improper.

  • The Office of Inspector General will receive the offset and post the payment if the court determines the offset is valid.

Injured Spouse

A spouse not included in the assistance unit at the time the debt was incurred is not responsible for the debt. The filing of a joint tax return may result in the intercept of the tax refund of an individual who is not liable for repayment of the debt. This money must be refunded to the individual who is not liable.

OIG is responsible for determining the amount of refund due to the innocent spouse.

Determine that one of the taxpayers was not a member of the assistance unit during the months of the overpayment.

Obtain from the taxpayers’ copies of each of their W-2 forms and a copy of the joint tax return for the appropriate year.

Calculate the percentage of the refund to be returned to the innocent spouse. If the calculation is made within 30 days from the date on the Department of Revenue notice, OIG staff release all or part of the tax refund. If the calculation is made after the 30 days expire, and the refund is already applied to the claim, OIG refunds the amount due the non-responsible spouse via Georgia Gateway.

Either spouse may request a hearing if they do not agree with the calculations. Note on the hearing form that the hearing involves an injured spouse provision.