1.35.7 Debt Collection

Manual Transmittal

September 23, 2013

Purpose

(1) This transmits new IRM 1.35.7, Financial Accounting, Debt Collection.

Material Changes

(1) This IRM contains policies and procedures for non-tax debt collection.

Effect on Other Documents

This IRM incorporates and supersedes:
1. Chief Financial Officer policy memorandum, IRS Policy on Collection of Employee Non-Tax Debt and Salary Offset for Undisputed Delinquent Travel Charge Card Indebtedness, dated October 13, 2004.
2. Chief Financial Officer Interim Guidance Memorandum CFO-01-0412-01, Reissued Interim Guidance on Repayment and Collection of Relocation Advances, dated April 17, 2012.

Audience

All Divisions and Functions.

Effective Date

(10-01-2013)

Pamela J. LaRue
Chief Financial Officer

Overview

  1. This IRM provides policies and procedures for the collection of non-tax delinquent debts owed to the IRS.

  2. This IRM applies to current and former IRS employees that owe non-tax debts to the IRS.

  3. Current and former IRS employees who owe non-tax debts are referred to as "employees" throughout this IRM.

  4. The Chief Financial Officer, Financial Management Unit, Office of Financial Management Policy, develops and maintains this IRM.

Background

  1. The Federal Claims Collection Act of 1966 gave agencies certain authorities to collect debts owed to them. The Debt Collection Act of 1982, as amended, expanded this authority to include reporting delinquent debts to credit reporting bureaus and referring debts to private collection agencies. In 1984, the agencies' collection authority was further expanded with the passage of the Deficit Reduction Act which enabled agencies to offset tax refunds to collect non-tax delinquent debts. The Debt Collection Improvement Act of 1996 established a framework for improved Federal debt collection by:

    1. Centralizing the management of debts delinquent more than 180 days in the Department of the Treasury, Bureau of the Fiscal Service.

    2. Providing agencies with more effective debt collection tools.

  2. The policy of the Department of the Treasury is to enforce collection of all non-tax debts in accordance with statutory and regulatory requirements.

  3. The IRS employs all available debt collection tools to enforce collection of its non-tax debt. This includes referring debts to the Department of Treasury, Bureau of the Fiscal Service (BFS), in accordance with the requirements of the Debt Collection Improvement Act of 1996. Under the cross-servicing arrangement, BFS employs all available debt collection tools. These tools include:

    1. Reporting delinquent debts to credit reporting bureaus.

    2. Referring delinquent debts to private collection agencies.

    3. Referring delinquent debts for administrative wage garnishment.

    4. Offsetting Federal and private sector payments.

    5. Referring debts to the Department of Justice for litigation.

Authorities

  1. The authorities for this IRM include:

    1. Federal Claims Collection Act of 1966, as amended, 31 USC 3701, 3711.

    2. Fair Debt Collection Practices Act, Pub. L. 95-109.

    3. Debt Collection Act of 1982, Pub. L. 97-365.

    4. Deficit Reduction Act of 1984, Pub. L. 98-369.

    5. Debt Collection Improvement Act of 1996, Pub. L. 104-134.

    6. 5 USC 4108, Employee Agreements; Service After Training.

    7. 5 USC 5514, Installment Deduction for Indebtedness to the United States (Federal Salary Offset).

    8. 5 USC 5524, Review of Accounts.

    9. 5 USC 5584, Claims for Overpayment of Pay and Allowances, and of Travel, Transportation and Relocation Expenses and Allowances.

    10. 5 USC 8906, Contributions.

    11. 31 USC Sections 3711 - 3720E, Claims of the United States Government.

    12. 5 CFR Section 550.1104, Agency Regulations Governing the Collection of a Debt by Salary Offset.

    13. 5 CFR Part 630, Subpart B, Definitions and General Provisions for Annual and Sick Leave.

    14. 5 CFR Section 630.209, Refund for Unearned Leave.

    15. 5 CFR Section 890.502, Withholdings, Contributions, LWOP, Premiums, and Direct Premium Payment (Federal Employees Health Benefit Program).

    16. 31 CFR Part 285, Debt Collection Authorities Under the Debt Collection Improvement Act of 1996.

    17. 31 CFR Section 5.12, How Will Treasury Entities Offset a Federal Employee's Salary to Collect a Treasury Debt?

    18. 31 CFR Parts 900-904, Federal Claims Collection Standards.

    19. Office of Management and Budget Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables.

    20. Managing Federal Receivables, A Guide for Managing Loans and Administrative Debt.

    21. Treasury Directive 34-01, Waiving Claims Against Treasury Employees for Erroneous Payments.

    22. Treasury Directive 34-02, Credit Management and Debt Collection.

    23. IRM 1.2.40.14, Delegation Order 1-15, Waiving Claims Against Current or Former Employees for Erroneous Payments.

    24. IRM 1.2.40.15, Delegation Order 1-16, Agency Collection Action.

Related Resources

  1. Related resources for this IRM include:

    1. Travel and Transportation Reform Act of 1998, Pub. L. 105-264.

    2. 41 CFR Chapters 300-304, Federal Travel Regulation.

    3. IRM 1.32.1, Official IRS Local Travel Guide.

    4. IRM 1.32.4, Travel Card Program Handbook.

    5. IRM 1.32.11, Official IRS City-to-City Travel Guide.

    6. IRM 1.35.13, Administrative Waiver.

    7. IRM 6.550.1, Pay Administration (General).

    8. IRM 6.630.1, IRS Absence and Leave.

Definitions

  1. In this IRM, the terms below have the following meanings:

    1. Account Receivable - An amount owed the Government by an individual, organization, or other entity to satisfy a debt or claim.

    2. Additional Interest - The amount assessed on delinquent debts in order to compensate the Government for the time value of money owed and not paid when due. Additional interest is accrued and assessed from the date of delinquency.

    3. Administrative Charges - Additional costs incurred for processing and handling a debt.

    4. Administrative Debt - A debt that occurs as a result of administrative actions.

    5. Administrative Wage Garnishment (AWG) - The process of issuing a wage garnishment order to a non-Federal employer.

    6. Administrative Wage Garnishment Hearing Official - An IRS manager who conducts a hearing and issues a decision.

    7. Appeal - An administrative or judicial proceeding in which the employee requests an independent review of the determination that the employee owes all or part of the debt.

    8. Automatic Stay - The statutory court order that prohibits the Department of the Treasury from pursuing further collection action against an employee while the employee's bankruptcy is pending.

    9. Bankruptcy - A legal procedure established under one of the chapters of Title 7, 11, or 13 of the United States Code (Bankruptcy Code) whereby an employee may seek relief from the claims of a creditor.

    10. Compromise - Acceptance of less than the full amount of the debt owed from the employee in satisfaction of the debt.

    11. Contingency Fees - Administrative costs assessed by the Bureau of the Fiscal Service and/or private collection agencies for the successful enforced collection of delinquent debt. Contingency fees are paid from amounts collected from the employee.

    12. Cross-servicing - The process whereby agencies refer delinquent Federal non-tax debt to the Bureau of the Fiscal Service for enforced collection.

    13. Debt - An amount of money which has been determined by an appropriate Federal official to be owed to the United States from a current employee or a former employee.

    14. Debt Collection - The recovery of non-tax debts owed to the IRS by collection.

    15. Default - Failure to meet a financial obligation.

    16. Delinquent - A debt that is not paid by the date specified in the demand letter or received in compliance with the terms of an approved repayment agreement.

    17. Disposable Pay - The amount of an employee's wages which remains after deductions from earnings of any amount required by law to be withheld. These deductions include, but are not limited to, FICA taxes, Medicare taxes, and Federal, state, and local income taxes. They do not include discretionary deductions such as financial allotments and charitable contributions.

    18. Due Process - The requirement to give an employee notice of and the opportunity to dispute a debt and intended collection action.

    19. Enforced Salary Offset - The process of collecting a percentage of an employee's current salary to satisfy a delinquent non-tax debt.

    20. Financial Hardship - An inability to meet the basic living expenses for goods and services necessary for the survival of the employee, his/her spouse, and any dependents.

    21. Health Insurance Receivable - A debt established to recover salary advanced to an employee to pay for his/her share of Federal Employees Health Benefit (FEHB) premiums submitted by the IRS to the insurance carrier during a period of non-pay or insufficient pay status.

    22. Interest - The amount assessed on delinquent debts in order to compensate the Government for the time value of money owed and not paid when due; interest is accrued and assessed from the date of delinquency. Often referred to as additional interest.

    23. Late Charges - Amounts accrued and assessed on a delinquent debt; includes administrative costs, penalties, and additional interest.

    24. Litigation - A legal action or process in a court for full or partial debt recovery.

    25. Lump Sum Payment - A single non-recurring payment to pay a debt in full.

    26. Non-Treasury Hearing Official - An Administrative Law Judge or other individual authorized to conduct a hearing and issue a final decision. The hearing official is an individual who is outside the control of the Secretary of the Treasury.

    27. Overpayment - Any amount paid to an employee that is in excess of the amount owed to the employee and to which the employee is not entitled.

    28. Penalties - Punitive charges assessed on delinquent debts. The rate to be assessed is set by law and is assessed on the portion of a debt remaining delinquent more than 90 calendar days.

    29. Principal - An amount owed by the employee, excluding interest, penalties, administrative costs, fees, and prepaid charges.

    30. Private Collection Agency - A private-sector entity whose primary business is the collection of delinquent debts.

    31. Repayment Agreement - A legally enforceable written agreement to repay monies owed in more than one payment at fixed intervals over time.

    32. Restitution - Compensation for a loss, damage, or injury.

    33. Reschedule - A change in the existing terms or conditions to facilitate repayment of a debt.

    34. Salary Debt - A debt that occurs as a result of pay and leave actions, including FEHB and health insurance receivable debts.

    35. Salary Offset - The process of collecting a percentage or set dollar amount of an employee's current salary to repay a debt.

    36. Treasury Offset Program (TOP) - A Bureau of the Fiscal Service program that offsets all eligible Federal payments for repayment of delinquent debt.

    37. Wage Garnishment - The process of withholding amounts for an employee's delinquent non-tax debt from disposable non-Federal wages and paying those amounts to the Government in accordance with a withholding order.

    38. Waiver - The cancellation, remission, forgiveness or non-recovery of a debt owed by an employee to an agency as permitted under statute.

    39. Waiver Request - A petition to grant relief from repaying a debt.

Acronyms

  1. The following acronyms are used in this IRM:

    Acronym Meaning
    AWG Administrative Wage Garnishment
    AWSS Agency-Wide Shared Services
    BFC Beckley Finance Center
    BFS Bureau of the Fiscal Service
    ESP Emergency Salary Payment
    FEHB Federal Employees Health Benefits
    NFC National Finance Center
    TAP Tuition Assistance Program
    TOP Treasury Offset Program
    WTA Withholding Tax Allowance

Responsibilities

  1. This section provides responsibilities for:

    1. Employees.

    2. Managers/Supervisors.

    3. Chief Financial Officer.

    4. Associate Chief Financial Officer for Financial Management.

    5. Director, Office of Financial Management Policy.

    6. Director, Beckley Finance Center.

    7. Chief, Agency-Wide Shared Services.

    8. Director, Employee Support Services, Agency-Wide Shared Services.

    9. Associate Director, Payroll and Personnel Systems, Agency-Wide Shared Services.

    10. Associate Chief Counsel (Finance and Management).

    11. Director, Human Resources Division, Chief Counsel.

    12. Chief, Payroll and Processing Branch, Chief Counsel.

Employees

  1. Employees are responsible for paying all non-tax debts owed to the IRS.

Managers/Supervisors

  1. Managers/supervisors are responsible for:

    1. Reminding employees of the need to meet their financial obligations.

    2. Reminding employees of their responsibilities to timely pay all undisputed debts.

    3. Applying appropriate disciplinary action, when warranted.

Chief Financial Officer

  1. The Chief Financial Officer (CFO) is responsible for overseeing the debt collection function in conjunction with the Chief, Agency-Wide Shared Services.

Associate Chief Financial Officer for Financial Management

  1. The Associate Chief Financial Officer for Financial Management is responsible for:

    1. Managing the administrative debt collection process.

    2. Submitting requests for termination and close-out of debts to Chief Counsel for approval.

Director, Office of Financial Management Policy

  1. The Director, Financial Management Policy is responsible for:

    1. Establishing policies and procedures for the collection of non-tax debts owed to the IRS.

    2. Reviewing and recommending action for administrative debts submitted for termination of collection and write-off.

    3. Serving as a hearing official for an administrative wage garnishment hearing request for administrative debts.

    4. Obtaining and providing the services of a non-Treasury hearing official for salary offset hearings.

Director, Beckley Finance Center

  1. The Director, Beckley Finance Center is responsible for:

    1. Managing the collection of and accounting for administrative debts, including posting and applying payments received.

    2. Notifying employees of their rights in accordance with the debt collection laws and regulations.

    3. Issuing demand letters and other correspondence for indebtedness other than for taxes and most salary debts.

    4. Providing responses to employees' inquiries.

    5. Receiving employee requests for salary offset hearings and referring the requests to the non-Treasury hearing official.

    6. Referring delinquent administrative debts to the Department of the Treasury, BFS for salary offset.

    7. Issuing Form 1099-C, Cancellation of Debt, when applicable.

Chief, Agency-Wide Shared Services

  1. The Chief, Agency-Wide Shared Services (AWSS) is responsible for overseeing the salary, leave, and health benefits debt collection function.

Director, Employee Support Services, Agency-Wide Shared Services

  1. The Director, Employee Support Services, AWSS is responsible for (excluding Chief Counsel employees):

    1. Overseeing the salary, leave, and health benefits debt collection function.

    2. Serving as a hearing official for an administrative wage garnishment hearing request for salary debts.

    3. Issuing Form 1099-C, Cancellation of Debt, when applicable.

Associate Director, Payroll and Personnel Systems, Agency-Wide Shared Services

  1. The Associate Director, Payroll and Personnel Systems, AWSS is responsible for:

    1. Managing salary, leave, and health benefits debt collection.

    2. Ensuring debt is correctly established in the National Finance Center (NFC) Administrative Billings and Collection System.

    3. Notifying employees of their salary, leave, and health benefits indebtedness.

    4. Notifying employees of their rights in accordance with the debt collection laws and regulations.

    5. Receiving employee requests for salary offset hearings and referring the requests to the CFO.

    6. Providing responses to employees' inquiries.

    7. Cancelling debts, as appropriate, for deceased employees in accordance with Delegation Order 1-16, Agency Collection Action.

    8. Providing debt collection letters to the Chief, Payroll and Processing Branch, Chief Counsel.

Associate Chief Counsel (Finance and Management)

  1. The Associate Chief Counsel (Finance and Management) is responsible for:

    1. Overseeing the debt collection function for Chief Counsel employees.

    2. Referring debts to the Department of Justice.

    3. Approving debt requests for termination and close-out.

Director, Human Resources Division, Chief Counsel

  1. The Director, Human Resources Division, Chief Counsel is responsible for:

    1. Overseeing the salary, leave, and health benefits debt collection function for Chief Counsel employees.

    2. Serving as a hearing official for an administrative wage garnishment hearing request for administrative debts.

Chief, Payroll and Processing Branch, Chief Counsel

  1. The Chief, Payroll and Processing Branch, Chief Counsel is responsible for:

    1. Managing salary, leave, and health benefits debt collection.

    2. Ensuring debt is correctly established in the National Finance Center (NFC) Administrative Billings and Collection System.

    3. Notifying employees of their salary, leave, and health benefits indebtedness.

    4. Notifying employees of their rights in accordance with the debt collection laws and regulations.

    5. Receiving employee requests for salary offset hearings and referring the requests to the CFO.

    6. Providing responses to employees' inquiries.

    7. Reviewing and recommending action for administrative debts submitted for termination of collection and write-off.

    8. Cancelling debts, as appropriate, for deceased employees in accordance with Delegation Order 1-16, Agency Collection Action.

Debts Arising from Pay and Leave Actions

  1. Employees may incur debts that arise as the result of pay and leave actions. Some examples include, but are not limited to:

    1. Emergency salary payments.

    2. Advanced leave.

    3. Salary overpayments.

    4. Federal Employees Health Benefits Premiums.

Emergency Salary Payments

  1. An emergency salary payment (ESP) may be issued to replace a salary payment that NFC did not generate due to an administrative error. An ESP is a loan payment advanced to an employee and is not eligible for waiver.

  2. An ESP is collected from the employee's next salary payment.

  3. If IRS does not collect the ESP in the same calendar year as it was paid, then IRS reports the uncollected ESP as income on the employee's W-2, Wage and Tax Statement.

  4. For additional information about repaying an ESP, refer to the ERC web site at: http://erc.web.irs.gov/. Insert the words emergency salary payments in the Search box.

Advanced Leave

  1. In accordance with 5 CFR Part 630, Subpart B, IRS may advance sick or annual leave to an employee within certain limitations. Advanced leave is not an employee entitlement and results in a:

    1. Negative leave balance for the employee.

    2. Debt for the amount of the advanced leave.

  2. An employee must repay all advanced leave by accumulating enough leave to obtain a zero or positive leave balance or by repaying the cash amount equivalent to the negative leave balance, before the end of his/her appointment or before separating from IRS.

  3. In accordance with 5 CFR Section 630.209, Refund for Unearned Leave, exceptions to the requirement to repay the advanced leave are as follows:

    1. Entrance into active military duty with a right of restoration. Employees are not considered separated for this purpose.

    2. Death of the employee.

    3. Separation on a disability retirement.

    4. Resignation or separation because of a disability which prevents the employee from returning to duty or continuing in the Federal service.

  4. Before a manager advances any leave, the manager must consider how long it will take the employee to accumulate the leave needed to offset the advanced amount. For example, if a manager advances 100 hours of sick leave to an employee, the employee would need to work full-time for 25 pay periods to repay the leave. Advanced leave carries from one leave year to the next leave year. IRM 6.630.1, IRS Absence and Leave, details the maximum amount of sick or annual leave a manager may advance.

  5. An employee’s request for and use of advanced annual or sick leave serves as the employee’s commitment to repay the amount of the advanced leave. If the employee separates from IRS or leaves Federal service, then the employee is expected to remit payment for the cash equivalent of the negative leave balance, subject to the exceptions listed in IRM 1.35.7.8.2 (3), above.

  6. If the employee fails to repay the advanced leave, by either accumulating enough leave or remitting a check to IRS before separating, then IRS considers the debt to be delinquent as of the separation date. The IRS will take all appropriate collection action to enforce recovery of the debt.

  7. Advanced leave does not represent an erroneous payment. Therefore, IRS does not have the authority to waive the collection of debts arising from advanced leave.

Salary Overpayments

  1. Salary overpayments are usually erroneous payments which arise as a consequence of administrative error from:

    1. Time and attendance transactions.

    2. Payroll processing.

    3. Personnel actions by either the employee or IRS.

  2. Salary overpayments also include errors in processing Federal employee health benefits which are unrelated to employee rights to continue or terminate coverage when the employee goes into a non-pay or insufficient pay status. See IRM 1.35.7.8.4 for FEHB premiums information.

  3. An employee is expected to repay a salary overpayment, even one caused by an IRS administrative error. The employee has the responsibility to notify IRS of the error and to set aside overpaid amounts for future repayment. Salary overpayments which are not repaid in the year of the overpayment are considered taxable income and reported on the employee’s Form W-2, Wage and Tax Statement.

  4. The IRS notifies the employee when it determines that a salary overpayment has occurred and requests repayment. Failure to remit payment or enter into an acceptable repayment agreement by the date specified in the demand letter will result in the debt being considered delinquent.

  5. The IRS garnishes a salary overpayment debt of $50 or less. The salary debt is automatically withheld from the next salary payment, and a notice is placed on the Statement of Earnings and Leave for the collection. Third party debts are exempt from this garnishment.

  6. An employee who receives an erroneous salary overpayment may request a waiver of repayment. See IRM 1.35.13, Administrative Waiver, for more information.

Federal Employees Health Benefits Premiums

  1. The Federal Employees Health Benefits (FEHB) program provides health benefits for Federal employees. Both the employee and the IRS pay a portion of the premium amount, with the employee’s share deducted from salary each pay period. An employee may experience a situation when he/she cannot pay his/her share of the premiums. This may include:

    1. Entering into a non-pay status.

    2. Receiving insufficient pay to cover the FEHB premium amount.

    3. Experiencing a life event that requires special processing. See IRM 1.35.7.8.3, Salary Overpayments, for additional information on debts resulting from FEHB special processing.

  2. Under Public Law 104-208, an employee who is enrolled in an FEHB plan and goes into leave without pay status may elect to continue his/her enrollment in FEHB for a period not to exceed one year. The statute also requires the employee and IRS to pay the premium on a current basis and requires IRS to advance pay to cover the employee’s share of the health insurance premium. The employee is obligated to repay the amount of the advanced pay to IRS.

  3. When an employee enters into a non-pay status or receives insufficient pay, the AWSS Payroll Center notifies the employee of his/her options to terminate or continue health insurance coverage. If the employee elects to continue coverage and does not pay his/her health insurance premiums, the employee becomes indebted to IRS. The AWSS establishes a health insurance receivable to record the pay advanced to cover the employee’s share of the health insurance premiums. When the employee returns to pay status, IRS begins withholding an additional premium per pay period to recover the advance payment per its agreement with the employee.

  4. When an employee’s pay is insufficient to cover this additional premium withholding or if the employee subsequently returns to a non-pay or insufficient pay status, IRS expects the employee to repay the advance payment by remitting regular, recurring payments. If the employee does not do so, IRS notifies the employee. The debt becomes delinquent when the employee fails to remit a missed premium within 30 days of the due date.

  5. The FEHB premiums advanced per an employee's request during periods of non-pay or insufficient pay status do not represent an erroneous payment. Therefore, IRS does not have the authority to waive the collection of debts arising from advanced pay.

  6. For additional information about repaying FEHB premiums, see:

    1. "Payroll Debts Owed to the Service" in the Pay chapter of Document 9669, Employee Personnel Resource Guide.

    2. Employee Resource Center (ERC).

    3. "Leave Without Pay Status and Insufficient Pay" chapter in the FEHB Program Handbook on the Office of Personnel Management website at: http://www.opm.gov/insure/health/reference/handbook/fehb00.asp.

Debts Arising from Administrative Actions

  1. Employees may incur debts arising from various administrative actions. These debts include, but are not limited to:

    1. Travel transactions.

    2. Relocation transactions.

    3. Tuition Assistance Program payments.

    4. Administrative overpayments.

    5. Restitutions.

Travel Transactions

  1. Many types of debts arise from travel transactions including but not limited to:

    1. Travel advances.

    2. Travel overpayments and corrections to original travel vouchers.

  2. Travel advances. The employee must repay the remaining balance when the employee's travel voucher does not liquidate the outstanding travel balance. If the trip is canceled, postponed, or the travel authorization has expired, the employee must repay the travel advance.

  3. Travel overpayments and corrections to original travel vouchers. Quarterly, BFC conducts a post review audit of randomly selected travel vouchers, and identifies any discrepancies. If the employee owes more than $25, BFC sends the employee and his/her manager an email and BFC establishes an accounts receivable.

  4. For all travel debts. Payment methods include Pay.Gov, or a check or money order, payable to the "Internal Revenue Service," and mailed to the CFO address listed in Exhibit 1.35.7-1.

  5. When the employee fails to respond to the notification for repayment, BFC initiates enforced collection action for the outstanding balance.

  6. If the employee fails to repay the outstanding balance within 150 calendar days of the travel end date, BFC reports the outstanding amount as wages on the employee's Form W-2, Wage and Tax Statement. The employee must still repay the outstanding balance.

  7. After BFC refers the debt to BFS, the Treasury Offset Program (TOP) offsets Federal payments due to the employee. This includes the employee's Federal salary, travel advances, travel or relocation voucher reimbursements, tax refunds, and Federal retirement payments.

  8. For additional information, see IRM 1.32.1, Official IRS Local Travel Guide, and IRM 1.32.11, Official IRS City-to-City Travel Guide.

Relocation Transactions

  1. Many types of debts arise from relocation transactions including but not limited to:

    1. Relocation advances.

    2. Service Agreements.

    3. Transportation of Household Goods.

    4. Withholding Tax Allowance (WTA).

    5. Relocation overpayments and corrections to original relocation vouchers.

  2. Relocation advances. The employee must repay the remaining balance when the employee's relocation voucher does not liquidate the outstanding balance of each relocation travel segment. If the relocation is canceled, the employee is responsible for repaying the full amount of the outstanding relocation advance.

  3. Service Agreements. When an employee violates a service or transportation agreement, or fails to effect the transfer or appointment, the employee must reimburse the amount expended by the IRS.

  4. Transportation of Household Goods. When the weight of an employee's household goods exceeds the maximum allowable weight limitation of 20,000 pounds (18,000 pounds of household goods plus 2,000 pounds of packing materials), the employee must reimburse the IRS for the transportation costs and other charges for the excess weight. If the mover or third party service provider performs services not allowable by the regulations, the employee must reimburse the IRS.

  5. Withholding Tax Allowance (WTA). The BFC calculates and applies the Withholding Tax Allowance (WTA) to the employee's relocation voucher on the employee's behalf. When the employee's taxable income places him/her in an income bracket below 25 percent, the IRS determines the amount of Federal taxes overpaid. The employee must reimburse IRS for the overpayment.

  6. Relocation overpayments and corrections to original relocation vouchers. The BFC audits relocation vouchers upon receipt and identifies any discrepancies. If the employee owes more than $25, BFC sends the employee and his/her manager an email and establishes an accounts receivable.

  7. For all relocation debts. Payment methods include Pay.Gov, or a check or money order, payable to the "Internal Revenue Service," and mailed to the CFO address listed in Exhibit 1.35.7-1.

  8. When the employee fails to respond to the notification for repayment, BFC initiates enforced collection action for the outstanding balance.

  9. When the employee does not repay the outstanding balance, or account for the relocation expenses, the entire amount of the outstanding balance is due and subject to enforced collection action.

  10. When the debt is referred to BFS, the Treasury Offset Program (TOP) offsets Federal payments due to the employee. This includes the employee's Federal salary, travel advances, travel or relocation voucher reimbursements, tax refunds, and Federal retirement payments.

Tuition Assistance Program

  1. The Tuition Assistance Program (TAP) is a Servicewide program providing funding to IRS employees pursuing courses that support both career development and the mission of the IRS. The IRS funds the cost of tuition, fees and books to approved participants.

  2. The employee is required to repay any tuition and related fees when:

    1. The employee does not complete the course satisfactorily.

    2. The employee voluntarily leaves the IRS before completing the agreed amount of service.

    3. The CFO does not grant a request to waive the repayment of the tuition and related fees.

  3. The IRS requires a participating employee to receive at least a "C" in a graded course or a "P" in a pass/fail course. The employee must provide an official grade transcript and/or certificate of completion for non-graded courses to a TAP representative within 30 days after the course end date to substantiate that the employee met this requirement. An employee who does not meet this requirement is required to reimburse the IRS for all costs incurred.

  4. If the employee withdraws from or fails to complete a course, the employee must reimburse the IRS for all costs incurred. Courses taken or placed in audit status are not eligible for funding under TAP. Regardless of a school's grading policy, IRS does not consider a final grade of "D" a passing grade. IRS places an employee who receives a "D" in payback status.

  5. An employee who attends non-Government training of 80 hours or more must sign an Employee's Agreement to Continue in Service. The employee agrees to continue in service for a period at least equal to three times the length of the training period. If the employee voluntarily leaves the Government before the agreed upon amount of service, IRS has the right to require repayment for the tuition and related fees, travel, and other incidental expenses (excluding salary) incurred in connection with the training.

  6. Under 5 USC 4108(c), the IRS has the authority to waive an employee's training debt if the agency determines that enforcing the debt would be against equity or good conscience. This authority is delegated to the CFO.

  7. For additional information on the requirements to repay a TAP debt, see IRM 6.410.1, Learning and Education Policy.

Administrative Overpayments

  1. An administrative overpayment occurs when an employee or former employee receives a payment in excess of the amount entitled, including payments made in error.

  2. The IRS enforces collections on all overpayments.

  3. When IRS makes an overpayment, the employee or former employee is obligated to repay the overpayment.

Restitutions

  1. A restitution debt occurs when an employee is held liable for a loss incurred by IRS as a result of negligent, willful, unauthorized or illegal acts. Examples include:

    1. Theft, misuse or loss of Government funds.

    2. False claims for services and travel.

    3. Illegal, unauthorized obligations and expenditures of Government appropriations.

    4. Using or authorizing the use of Government-owned or leased equipment, facilities, supplies and services for other than official or approved purposes.

    5. Lost, stolen, damaged or destroyed Government property or equipment.

    6. Improper purchases made with the Government purchase card.

  2. The employee is responsible for compensating the IRS for the value of any losses.

  3. For additional information about improper purchases, visit the ERC web site at: http://awss.web.irs.gov/Procurement/policy/restricted_purch_lst.shtml for the Restricted Purchase List.

Demand Letter and Due Process Rights

  1. Federal debt collection statutes require IRS to provide employees with demand letters and due process rights. These include:

    1. Informing the employee of the type or nature of the debt owed.

    2. Informing the employee of the amount of a debt.

    3. Giving the employee the right to inspect and copy records related to the debt.

    4. Giving the employee the opportunity to enter into a repayment agreement.

    5. Giving the employee the opportunity to request a review of the debt.

    6. Informing the employee of the actions IRS may take to enforce collection of the debt.

  2. The IRS sends a demand letter to the employee when an accounts receivable is established for a debt. Each letter is specific for the type of debt, and contains the due process rights. The demand letter includes the following information:

    1. Type or nature of the debt owed.

    2. The amount of the debt.

    3. The payment due date, usually 30 calendar days from the date of the letter.

    4. Repayment options available to the employee.

    5. The opportunity to repay the debt in full.

    6. The address to submit the payment.

    7. An IRS point of contact regarding the debt.

    8. The opportunity to enter into a repayment agreement.

    9. The opportunity to inspect and copy IRS records related to the debt.

    10. The opportunity to request a proof of debt and dispute the amount and/or the existence of the debt.

    11. The IRS policies regarding the assessment of interest, administrative charges, and penalties.

    12. The collection actions IRS may take to enforce collection if the debt is not paid by the payment due date. This includes referring the debt to BFS for collection by offset or a private collection agency, reporting the debt to a credit reporting bureau, referring the debt to the Department of Justice, or commencing enforced salary offset.

    13. Instructions for submitting a financial hardship request.

    14. The opportunity to request a waiver of the debt.

    15. The opportunity to request a hearing before a non-Treasury hearing official regarding the proposed salary offset.

  3. The IRS mails demand letters through the U. S. Postal Service by first-class postage.

  4. The IRS is not obligated to repeat or duplicate due process rights or to enter into a repayment agreement that is not in the Government’s interest or consistent with regulatory requirements.

Proof of Debt

  1. An employee who receives a demand letter may request a review concerning the existence or amount of the debt.

  2. The IRS must receive the employee's request for a review on or before the 15th calendar day after the employee receives the letter.

  3. The employee completes Option 1 on the Proof of Debt form enclosed with the demand letter and submits it to the IRS address in the letter using one of the following methods:

    1. Fax.

    2. Email.

    3. Mail.

  4. The employee may provide documentation showing the debt is not owed. Acceptable documentation includes, but is not limited to:

    1. Copies of debt documentation.

    2. Copies of checks showing payment.

    3. Credit card and bank statements.

    4. Incident reports for restitution obligation.

  5. During the proof of debt review period, IRS suspends all collection activity.

  6. An IRS manager reviews the documentation provided by the IRS and the employee and issues a written decision as soon as possible after the review, but not later than 60 calendar days after the date IRS received the review request.

  7. The written decision includes:

    1. A statement of the facts presented to support the origin, nature, and amount of the debt.

    2. The IRS manager's findings, analysis, and conclusions.

  8. If the employee fails to submit a request for a review within the required time period, IRS will accept a late request if the employee can show that the late request was the result of:

    1. Circumstances beyond the employee's control.

    2. Failure to receive actual notice of the filing deadline.

  9. Interest, administrative charges, and penalties continue to accrue during the review and/or dispute period. If the IRS manager finds the debt is valid, IRS applies the accrued late fees to the debt amount.

  10. For additional information, refer to the ERC web site at: http://erc.web.irs.gov/. Insert the word "debt" in the Search box, and select Proof of Debt Hearing.

Repayment Options

  1. To avoid enforced collection on the debt, the employee must remit a lump sum payment for the full amount or enter into a repayment agreement.

  2. Repayment may be made by:

    1. Check or money order.

    2. Voluntary salary offset.

      Note:

      This option is only available if the employee is currently working and receiving pay.

    3. Pay.Gov.

  3. If an employee is financially unable to pay the debt in a lump sum payment, the employee may request, and the IRS may agree, to establish a repayment agreement to repay the debt.

  4. Repayment agreements may not be established for:

    1. Emergency salary payments. They are deducted from the next available salary payment.

    2. Health insurance receivables. 5 CFR Section 890.502 regulates the collection requirements for these receivables, except when IRS accepts an employee's financial hardship.

  5. The frequency and amount of the payment and the term of the repayment agreement are based on the debt balance and the employee's ability to repay. In order to liquidate the debt as quickly as possible, IRS requires the employee to remit an initial lump sum payment as large as the employee can afford with the signed agreement. The minimum repayment amount is:

    1. $50 per pay period for salary debts.

    2. $50 per month for administrative debts.

    The maximum term of the repayment agreement is 36 months.

  6. The IRS may assess administrative charges.

  7. When an employee enters into a repayment agreement, interest is collected for the term of the repayment agreement. If the employee defaults under the repayment agreement, the full amount of the unpaid debt is due and payable immediately. Penalties that accrued, but were not collected, during the repayment agreement period are added to the unpaid balance.

  8. If an employee does not respond to the demand letter or defaults on the repayment agreement and allows the debt to become delinquent, IRS begins enforced salary offset and refers the debt to BFS.

  9. If an employee separates from the IRS, the debt is repaid through lump sum deduction from the final salary, annual leave payment, and/or other payments in accordance with 31 CFR Section 5.12 (g)(4). Any remaining balance is referred to BFS.

  10. The IRS refunds to the employee any amount paid in excess of the balance owed, unless the amount is less than one dollar ($1).

    Note:

    The IRS prohibits an employee from using the official Government travel card to repay a debt owed to the Government.

Check or Money Order

  1. The employee may send a check or money order to repay the entire debt.

  2. The employee completes the Voluntary Repayment Agreement and mails it with the check or money order to the IRS following the instructions on the Agreement.

Voluntary Salary Offset - Full Payment

  1. An employee may instruct the IRS to take the full amount of the debt by salary offset from the next paycheck.

  2. The employee completes the Voluntary Repayment Agreement and signs it. To use this option, the employee must be in pay status and receiving pay, not in non-pay status.

  3. The employee may fax, email, or mail the signed Agreement to the IRS following the instructions on the Agreement.

Voluntary Salary Offset - Partial Payments

  1. The employee may be unable to repay the full amount of the debt in a lump sum. The employee may request to make a payment each pay period that is more than 15% of his/her disposable pay.

  2. The employee completes the Voluntary Repayment Agreement and signs it.

  3. The employee may fax, email, or mail the signed Agreement to the IRS following the instructions on the Agreement.

  4. The IRS reviews the proposed repayment amount and contacts the employee to finalize the repayment terms. If the proposed amount is not acceptable to the IRS, the employee may request a financial hardship determination. See IRM 1.35.7.12.5, Financial Hardship.

  5. When the employee's pay becomes insufficient for any reason, the employee must remit payments by check or money order to the address on the Voluntary Repayment Agreement, or use Pay.Gov.

  6. If the employee defaults on the Voluntary Repayment Agreement, any debt balance becomes delinquent and is due and payable immediately. The IRS will initiate enforced collection action.

Pay.Gov

  1. The Federal Government has a secure electronic website on the internet called Pay.Gov. Employees may use this website to make payments directly to the IRS from a bank account or a credit/debit card. Follow this procedure:

    1. On the Internet, type in www.pay.gov.

    2. Locate the SEARCH PUBLIC FORMS box on the website.

    3. For IRS travel, administrative, and miscellaneous debt, enter IRSPMT in the box. Select Go. Next, select IRSPMT.

    4. For salary debt, enter NFC in the box. Select Go. Next, select USDA National Finance Center, Debt Collection Form.

    5. Enter the required information into the payment screen.

Financial Hardship

  1. An employee may request a financial hardship determination when he/she is unable to:

    1. Repay the full amount of the debt.

    2. Enter into a repayment agreement for 15 percent or more of his/her disposable pay per pay period.

    3. Maintain the terms of an established repayment agreement.

  2. The employee completes and signs the Financial Hardship Request enclosed with the demand letter package.

  3. The employee may fax, email, or mail the form to the IRS following the instructions on the form.

  4. The IRS reviews the proposed repayment agreement and may send a Confidential Financial Statement to the employee to complete. The statement is executed under penalty of perjury. The employee submits the completed financial statement and includes the following documents:

    1. Supporting documents for the employee, spouse, and dependents (if any). These include all income sources; assets; liabilities; number of dependents; expenses for food, housing, clothing and transportation; medical expenses; and exceptional expenses, if any.

    2. An alternative proposed offset or payment schedule of not less than $50 and a statement, with supporting documents, showing why the current salary offset or voluntary payments will result in an extreme financial hardship for the employee.

  5. The IRS reviews the documents, makes a determination based upon the facts, and notifies the employee in writing of the determination. If approved, the revised payment schedule is implemented. If disapproved, IRS provides the employee with a written justification for the financial hardship denial and commences collection action.

  6. When the employee's pay becomes insufficient for any reason, the employee must remit payments by check or money order to the IRS.

  7. If the employee defaults on the repayment schedule, the full amount of the debt becomes delinquent and is due and payable immediately. The IRS will initiate enforced collection action.

Enforced Salary Offset

  1. A debt owed to the IRS by one of its employees is subject to enforced salary offset if the employee allows the debt to become delinquent.

  2. Enforced salary offset may be instituted when an employee does not:

    1. Repay the debt in a lump sum.

    2. Establish a repayment agreement.

    3. Maintain the terms of an established repayment agreement to avoid delinquency.

  3. Delinquent Federal salary debts are referred to NFC to offset Federal salary.

  4. Delinquent administrative debts are referred to BFS, Treasury Offset Program (TOP) to offset Federal salary and other Federal payments.

  5. Each employee's delinquent debt is subject to a 15 percent withholding from his/her disposable pay each pay period. The 15 percent will be withheld if the employee does not:

    1. Elect to repay the debt in a lump sum.

    2. Agree in writing to a repayment agreement at a percentage greater than 15 percent.

    3. Agree in writing to a revised repayment schedule based on a financial hardship determination.

    4. Request a hearing before a non-Treasury hearing official.

    5. Request a proof of debt review of the debt.

    6. Request a waiver of the debt.

  6. Garnishments of multiple debts may not exceed 25 percent of an employee's disposable pay each pay period.

  7. The IRS terminates enforced salary offset when:

    1. The full amount of the debt is collected.

    2. The employee separates from IRS.

  8. For information about BFS and TOP collections, see IRM 1.35.7.18, Debts Referred to the Bureau of the Fiscal Service.

Waiver Request

  1. An employee may request a waiver of the debt.

  2. The waiver request must be received by the IRS within 15 calendar days from the date of the demand letter to suspend collection action.

  3. Emergency salary payments, advanced leave, and health insurance receivables debts for periods of non-pay/insufficient pay status are not eligible for waiver.

  4. The employee completes Option 2 on the Proof of Debt or Waiver Request form enclosed with the demand letter, signs it, and sends it to the address on the form.

  5. The employee may fax, email, or mail the form to the IRS following the instructions on the form.

  6. During the waiver process, IRS suspends all debt collection activity.

  7. Refer to IRM 1.35.13, Administrative Waiver, for information regarding the waiver process.

Petition for a Hearing Before a Non-Treasury Hearing Official

  1. Under 5 USC 5514, a Federal employee who receives a notice of a proposed salary offset for an IRS debt may request a hearing before a non-Treasury hearing official concerning:

    1. The existence or amount of the debt.

    2. The amount proposed to be deducted each pay period.

  2. To request a hearing, the employee must send the request before the 15th calendar day after receipt of the demand letter to the IRS address listed in the letter.

  3. If the employee fails to submit a request for a hearing within the required time period, the employee will have waived his/her right to a hearing, and IRS may initiate debt collection. However, the IRS will accept a late request for hearing if the employee can show that the late request was the result of:

    1. Circumstances beyond the employee's control.

    2. Failure to receive actual notice of the filing deadline.

  4. The employee and any witnesses called on behalf of the employee are personally responsible for all travel expenses incurred.

  5. During the hearing period, IRS suspends all collection activity. Interest, administrative charges, and penalties continue to accrue. If the decision finds the debt is valid, IRS applies the accrued late fees to the debt amount.

  6. In accordance with 31 CFR section 5.12, the hearing official must be an individual who is outside the control of the Secretary of the Treasury.

  7. For additional information, contact:

    1. CFO.BFC.Debt.Collection.Helpdesk@irs.gov.

    2. ERC web site at: http://erc.web.irs.gov/. Insert the word "debt" in the Search box.

Petition for a Hearing

  1. The employee must file a written, signed petition with the IRS on or before the 15th calendar day following the employee’s receipt of the IRS’ written notification of the existence or validity of a debt, or the involuntary repayment terms proposed by the IRS. If the request is received within 15 calendar days, salary offset procedures will be postponed until the decision is rendered.

  2. The petition for a hearing must include the following:

    1. The words, "Petition for Hearing Under the Debt Collection Act," prominently captioned at the top of the first page.

    2. A statement of the date the employee received the notice of collection under the Debt Collection Act.

    3. A copy of the notification.

    4. A statement detailing why the employee objects to the determination of the existence or amount of the debt, or to the proposed offset schedule. The statement should identify and explain with reasonable specificity and brevity the facts, evidence, witnesses (if any), and legal arguments that support the employee's position.

    5. For an oral hearing: An explanation of why the matter cannot be resolved by a review of the documentary evidence alone. A list of proposed witnesses and their addresses. The proposed city for the hearing site, with a justification for holding the hearing in that city.

    6. Alternative dates for the oral hearing.

    7. A copy of all records in the employee's possession relating to the debt.

    8. A copy of any Financial Hardship Agreement if the employee is contesting a proposed payment schedule.

  3. The employee sends the petition and the supporting documents to the IRS address on the petition. The IRS reviews the package for completeness. The package is returned if it is received after the 15th calendar day of receipt of the demand letter, or is incomplete. The employee may resubmit the package and missing documentation and/or a valid reason for the late request within 30 calendar days of the returned package. If the employee fails to respond, the employee will have waived his/her right to a hearing, and IRS may initiate enforced debt collection.

  4. The IRS includes additional documents supporting the IRS position and sends the petition to the non-Treasury hearing official where it is received, filed, and placed on the docket.

  5. The non-Treasury hearing official provides a full and fair hearing and issues a written final decision.

  6. The non-Treasury hearing official may determine the employee has waived his/her right to a hearing and the employee’s pay will be offset in accordance with the IRS offset schedule, if the employee:

    1. Fails to demonstrate to the satisfaction of the non-Treasury hearing official good cause for the delay.

    2. Fails to file the required submissions or to comply with orders of the non-Treasury hearing official, and the failure makes it difficult or impossible to hold the hearing or to issue the decision within the statutory time.

    3. Receives a notice to appear at an oral hearing and fails to do so without showing circumstances beyond the employee’s control.

    4. Files a withdrawal of his/her petition for a hearing with the non-Treasury hearing official.

Notice of Hearing

  1. The non-Treasury hearing official informs the employee, by written notice, of the:

    1. Type of hearing that will be provided.

    2. Date, time and location of the hearing for oral hearings.

    3. Date written documentation must be submitted to the non-Treasury hearing official for a paper hearing.

  2. The non-Treasury hearing official gives the employee reasonable time to submit documentation in support of his/her position.

  3. The non-Treasury hearing official schedules a new hearing date if requested by the employee, and gives the employee reasonable notice of the time and place of a rescheduled hearing.

  4. If the employee disputes the existence or amount of the debt, the employee must prove by a preponderance of the evidence that no debt exists, and/or the amount of the debt is incorrect. Acceptable forms of evidence include:

    1. Copies of debt documentation.

    2. Copies of checks showing payment.

    3. Credit card and bank statements.

    4. Incident reports for restitution obligation.

Oral Hearing

  1. The non-Treasury hearing official conducts an oral hearing if the official determines the matter cannot be resolved by a review of documentary evidence alone. The hearing is conducted in a manner determined by the non-Treasury hearing official, including but not limited to:

    1. Informal conferences with the non-Treasury hearing official, in which the employee and a representative for the IRS will have full opportunity to present evidence, witnesses, and arguments.

    2. Informal interviews with the employee by the non-Treasury hearing official.

    3. Formal written submissions, with an opportunity for oral presentation.

  2. If the employee fails to appear at an oral hearing or fails to submit documentary evidence required for a paper hearing, the employee will have waived the right to a hearing, and IRS will initiate debt collection, unless the employee is absent for good cause (for example, excused illness). Furthermore, IRS will consider that the employee has admitted the existence and amount of the debt, as explained in the demand letter.

  3. If the representative for the IRS fails to appear at an oral hearing, the non-Treasury hearing official will:

    1. Proceed with the hearing as scheduled.

    2. Make a determination based upon the oral testimony presented and the documentary evidence submitted by the IRS and the employee.

Paper Hearing

  1. The non-Treasury hearing official may determine an oral hearing is not necessary based upon a review of the documentary evidence, including any documentation submitted by the employee and the IRS in support of their arguments.

Decision of the Non-Treasury Hearing Official

  1. The non-Treasury hearing official issues a written decision, based on documentary evidence submitted and information obtained at a paper hearing or an oral hearing, as soon as possible after the hearing, but not later than 60 calendar days after the date IRS received the petition.

  2. The written decision includes:

    1. A statement of the facts presented to support the origin, nature, and amount of the debt.

    2. The non-Treasury hearing official's findings, analysis, and conclusions.

  3. The non-Treasury hearing official's decision is final.

  4. If the non-Treasury hearing official determines that a debt may not be collected by salary offset, but IRS finds the debt is still valid, IRS may refer the debt to BFS to collect the debt through other means, such as offset of other Federal payments, litigation, or other collection tools.

  5. If the non-Treasury hearing official does not issue a decision within 60 calendar days after the date IRS received the petition, IRS will waive any applicable penalties applied to the debt for the period beginning on the 61st calendar day and ending on the day the decision is issued.

  6. The non-Treasury hearing official maintains a summary record of the hearing.

Delinquency

  1. A debt becomes delinquent if the employee does not:

    1. Pay the debt in full by the payment due date specified in the demand letter, or,

    2. Pay the debt in compliance with the terms of an approved repayment agreement.

  2. If an employee fails to respond to the demand letter and allows a debt to become delinquent, interest, administrative charges, and penalties that accrued are added to the unpaid balance, and IRS will begin enforced collection action.

Late Charges

  1. The IRS accrues and assesses interest, administrative charges, and penalties on delinquent debts owed to the Government in accordance with 31 USC 3717.

  2. The IRS assesses interest, administrative charges, and penalties as of the date of delinquency and continues accruing them until the debt is paid in full, unless:

    1. IRS waives interest, administrative charges, and penalties.

    2. IRS compromises or writes-off the amount of the debt.

    3. IRS terminates debt collection action.

Interest

  1. The IRS assesses interest on a debt at the Current Value of Funds Rate in effect at the time the debt becomes delinquent. The Current Value of Funds Rate is based on the Treasury Tax and Loan Rate for the 12-month period ending the previous September 30, rounded to the nearest whole percent.

  2. The interest remains fixed for the duration of the delinquency and does not compound.

  3. Interest is not assessed on interest, administrative costs or penalties.

Administrative Charges

  1. The IRS assesses administrative charges which represent the additional costs incurred by IRS for handling and processing a debt.

  2. Administrative charges are assessed when:

    1. The employee allows the debt to become delinquent.

    2. The employee establishes a repayment agreement with BFC.

    3. The IRS refers the debt to BFS.

Penalties

  1. The penalty rate IRS assesses is set by law at six percent per year. Penalties accrue on all amounts (principal, interest and administrative charges) that remain outstanding for more than 90 calendar days.

Waiver of Interest, Administrative Costs, and Penalties

  1. The IRS may waive in whole or in part the interest, administrative charges, and penalties in accordance with 31 CFR Section 901.9(g), when:

    1. The debt is paid within 30 calendar days from the initial debt notification date.

    2. The debt is waived as part of a compromise or settlement agreement.

  2. The IRS may waive the collection of late charges when it determines that collection would be against equity and good conscience or is not in the best interest of the Government.

Application of Payments

  1. The IRS applies delinquent debt payments received against the outstanding balance in the following order:

    1. Penalties.

    2. Administrative charges.

    3. Interest.

    4. Principal.

Debts Referred to the Bureau of the Fiscal Service

  1. The Debt Collection Improvement Act of 1996 requires agencies to refer all non-tax debts or claims owed to the Government that are delinquent for 180 calendar days or more for cross-servicing to the Department of the Treasury, Bureau of the Fiscal Service (BFS).

  2. An employee's debt is eligible for referral to BFS if:

    1. The debt is delinquent.

    2. The debt is legally enforceable.

    3. The debt is owed by an employee.

    4. The debt is greater than $25 (including penalties, administrative costs, and interest).

  3. The IRS does not refer an employee's debt to BFS if:

    1. The employee has requested a waiver and the waiver request is pending.

    2. The employee has filed for bankruptcy protection or the debt has been discharged in a bankruptcy proceeding.

    3. The debt is owed by an employee who is deceased.

  4. The IRS stops all collection activity after the debt is referred to BFS except enforced salary offset.

  5. When IRS refers a debt to BFS for enforced collection, BFS assesses contingency fees and deducts the contingency fees from amounts collected from the employee. The balance of the payment is applied to the delinquent debt using the order described in IRM 1.35.7.17, Application of Payments.

  6. Information on the BFS debt collection program is available on the BFS website at: http://fms.treas.gov/debt/.

Cross-Servicing Program

  1. Through the Cross-Servicing Program, BFS utilizes delinquent debt collection services to collect a debt. The BFS uses the following collection tools:

    1. Sends a demand letter.

    2. Makes phone calls.

    3. Negotiates payment agreement options.

    4. Reports to credit bureaus.

    5. Routes the debt to the Treasury Offset Program.

    6. Routes the debt to the Administrative Wage Garnishment Program.

    7. Refers the debt to private collection agencies.

    8. Refers the debt to the Department of Justice (DOJ).

  2. While cross-servicing a debt, BFS maintains debt balance information, collects the funds paid by the employee, and returns the funds to the IRS for proper processing, accounting, and posting to the employee's account.

  3. The BFS charges contingency fees to cover its costs related to the Cross-Servicing Program.

  4. Additional fees are assessed when the debt is:

    1. Collected through the Treasury Offset Program.

    2. Referred to private collection agencies.

    3. Referred to the DOJ.

  5. When BFS successfully offsets or otherwise collects all or part of a debt, BFS applies the collected amount in the following order:

    1. Contingency fees.

    2. Penalties.

    3. Administrative costs (other than contingency fees).

    4. Interest.

    5. Principal.

  6. The BFS continues to assess interest and penalties while it is enforcing the collection of a debt.

  7. The BFS refers debts to the DOJ for litigation on which aggressive collection activity has been taken and that cannot be compromised, or on which collection activity cannot be suspended or terminated.

  8. Information on the BFS Cross-Servicing Program is available on the BFS website at: http://fms.treas.gov/debt/.

Treasury Offset Program
  1. The Treasury Offset Program (TOP) is a centralized offset program, administered by BFS, to collect delinquent debts and child support payments owed to Federal and state agencies.

  2. When a debt is referred to TOP for collection, BFS intercepts payments due to the employee and applies the payment to the debt balance. Examples of payments subject to offset include, but are not limited to, tax refunds, travel advances, travel reimbursements, expense reimbursements, judgment payments, retirement payments, economic stimulus payments, Federal salaries, performance awards, and certain benefit payments such as Social Security payments.

  3. Legislative and regulatory authorities limit the amounts that can be offset:

    1. Tax refund payments and other payments not separately identified may be offset at 100 percent.

    2. Travel advances and travel reimbursements may be offset up to 100 percent.

    3. Federal retirement payments are limited to a 25 percent offset.

    4. Social Security and railroad retirement payments are limited to a 15 percent offset.

    5. Federal salary offsets are limited to a 15 percent offset of disposable pay.

  4. The BFS charges a fee to cover its costs for collections through TOP. The fee is collected from each offset.

  5. When the same employee owes multiple debts, BFS applies the collections in the following priority order:

    1. IRS income tax debts.

    2. Child support debts.

    3. Federal non-tax debts.

    4. State income tax debts.

  6. If the same employee owes multiple similar debts (for example, income tax debts from 2010 and 2011), BFS applies collections to liquidate the oldest debt first.

  7. Information on the BFS TOP is available on the BFS website at: http://fms.treas.gov/debt/.

Administrative Wage Garnishment
  1. Administrative wage garnishment (AWG) is a collection tool BFS uses to collect delinquent debt from:

    1. Federal employees who have private sector part-time jobs.

    2. Non-Federal employees.

  2. The BFS issues a demand letter informing the employee of:

    1. The debt and the balance due.

    2. The opportunity to pay the debt in full or enter into a repayment plan.

    3. The opportunity to inspect and copy the records.

    4. The opportunity to request a hearing.

    5. The actions BFS will take to enforce collection.

  3. The BFS issues a wage garnishment order to a delinquent employee’s non-Federal employer to recover the amount owed when the employee does not repay or enter into a repayment plan. The employer withholds amounts from the employee’s wages in compliance with the order and pays those amounts to BFS.

  4. Legislative and regulatory authorities limit the amount that can be offset to 15 percent of an employee's disposable income.

  5. While servicing a debt, BFS:

    1. Maintains the debt balance information.

    2. Collects the funds paid by the employee.

    3. Returns the funds to the IRS for proper processing, accounting, and posting to the employee's account.

  6. The BFS charges fees when IRS refers a debt for enforced collection, and BFS continues to assess interest and penalties while it is enforcing the collection of a debt.

  7. When BFS successfully offsets or collects all or part of a debt, BFS applies the collected amount to the debt in the following priority order:

    1. Fees.

    2. Penalties.

    3. Administrative costs (other than contingency fees).

    4. Interest.

    5. Principal.

  8. If an employee owes multiple debts, BFS applies the collections in the following priority order:

    1. IRS income tax debts.

    2. Child support debts.

    3. Federal non-tax debts.

    4. State income tax debts.

  9. The BFS applies the collections to liquidate the oldest debt first.

  10. Information on the BFS AWG is available on the BFS website at: http://fms.treas.gov/debt/.

Hearing Request
  1. The employee may contact BFS and request an AWG hearing regarding:

    1. The existence or amount of the debt.

    2. The terms of the proposed repayment schedule under the garnishment order.

  2. It is the responsibility of the employee to provide documentation that the debt is not owed.

  3. The employee must request a hearing within 15 business days after the AWG demand letter is mailed to the employee. If the employee fails to request a hearing, the employee will have waived his/her right to a hearing. However, a late request for a hearing may be accepted if the employee can show that the late request was the result of:

    1. Circumstances beyond the employee's control.

    2. Failure to receive actual notice of the filing deadline.

  4. If the employee requests a hearing due to financial hardship, BFS conducts the hearing. Otherwise, BFS forwards the request and the file to the IRS. The IRS reviews the request and arranges for the services of an AWG hearing official.

  5. An IRS manager, who does not have an interest in the employee's debt, conducts the AWG hearing. There is no requirement that the AWG hearing official be an Administrative Law Judge or someone outside the IRS.

  6. If the final written decision is issued in favor of the IRS, the BFS may collect on the wage garnishment after the written decision is mailed to the employee.

Notice of Hearing
  1. The AWG hearing official informs the employee in writing of the date any written documentation must be submitted to the AWG hearing official for a paper hearing, and allows the employee reasonable time to submit documentation in support of his/her position.

  2. If the employee disputes the existence or amount of the debt, the employee must prove by a preponderance of the evidence no debt exists, and/or the amount of the debt is incorrect. Acceptable forms of evidence includes, but is not limited to:

    1. Copies of debt documentation.

    2. Copies of checks showing payment.

    3. Credit card and bank statements.

    4. Incident reports for restitution obligation.

  3. If the employee fails to submit documentary evidence required for the hearing, IRS will consider that the employee has admitted the existence and amount of the debt.

Decision of the Administrative Wage Garnishment Hearing Official
  1. The AWG hearing official issues a written decision, based upon documentary evidence presented, as soon as possible after the hearing, but not later than 60 calendar days after the date IRS received the request for hearing.

  2. The written decision includes:

    1. A statement of the facts presented to support the origin, nature, and amount of the debt.

    2. The AWG hearing official's findings, analysis, and conclusions.

  3. The BFS notifies the employee's non-Federal employer to suspend collection on an issued wage garnishment order if a final decision is not issued by the 61st calendar day after the date the IRS received the request.

  4. The AWG hearing official's decision is final.

  5. The AWG hearing official maintains a summary record of the hearing.

Private Collection Agencies
  1. Through a contract administered by the General Service Administration, BFS refers delinquent uncollected debts to private collection agencies 30 calendar days (or 15 calendar days, if the employee did not provide a phone number) after the date BFS issues a demand letter.

  2. A private collection agency remits any collections received to BFS. The BFS, in turn, remits the funds to the IRS with supporting detailed debt information. Private collection agencies assess fees for collecting debts and deduct the assessed fees from the amount collected before remitting the funds to BFS.

  3. The BFS provides guidance and standards for private collection agencies to follow when negotiating acceptable repayments plans and compromise agreements with employees. The guidance and standards are based on the IRS parameters contained in the IRS Letter of Agreement with BFS.

Bankruptcy

  1. When an employee files for bankruptcy protection, IRS is prohibited from pursuing further collection action while the bankruptcy is pending because of the automatic stay, which is effective on the date of the filing of a bankruptcy.

  2. The BFS returns previously referred delinquent debts to the IRS when BFS determines the employee has filed for bankruptcy protection.

  3. If a debt is released or discharged by the bankruptcy court, IRS is precluded from pursuing collection on debts incurred by the employee prior to filing for bankruptcy protection.

  4. If the debt is dismissed by the bankruptcy court, IRS continues enforced collection efforts.

  5. Any debt incurred after the employee files for bankruptcy is not covered by the automatic stay and the IRS may begin enforced collection activity.

Retirement and Separation

  1. Employees are responsible for satisfying debts owed to IRS prior to separation and/or retirement. The employee must contact AWSS and/or BFC prior to leaving IRS to discuss payment arrangements for any unpaid debt.

  2. The IRS employs all available collection tools described in this IRM to collect any unpaid debts owed by a former employee.

  3. The employee's final salary payment and/or lump sum leave payment may be offset if the employee does not satisfy the debt. The final salary payment may be delayed or reduced by the amount owed. The 15 percent disposable pay limit does not apply. If the entire debt is not satisfied, IRS establishes an accounts receivable for the remaining debt, and begins collection activity.

  4. When an employee retires and has a salary debt, the National Finance Center notifies the Office of Personnel Management (OPM) to garnish retirement benefits.

  5. For additional information:

    1. Refer to "Schedule of Separation Actions" in the Retirement chapter of Document 9669, Employee Personnel Resource Guide at: http://erc.web.irs.gov/DOCS/2002/AWSS/PS/eprg0200/EPRGWEB.pdf.

    2. Contact the Employee Resource Center (ERC) using OS GetServices.

Fraud Claims

  1. If the IRS identifies a debt arising from fraud, false statements, or misrepresentations by an employee, the IRS will refer the matter to Treasury Inspector General for Tax Administration (TIGTA) or Chief Counsel for possible referral to the Department of Justice.

Termination and Write-off of Debts

  1. The IRS writes off debts in accordance with the following criteria:

    1. The IRS is unable to collect any substantial amount through its own efforts or through the efforts of others.

    2. The IRS is unable to locate the employee.

    3. Costs of collection are anticipated to exceed the amount recoverable.

    4. The debt is legally without merit or enforcement of the debt is barred by applicable statute of limitations.

    5. The debt cannot be substantiated.

    6. The debt has been discharged in bankruptcy.

  2. After the debt is written off, the amount of indebtedness is reported as potential income to the employee on Form 1099-C, Cancellation of Debt, if the debt is $600 or more. This includes the principal, interest, penalties, and administrative costs.

  3. The debt is not reported on Form 1099-C when it is discharged by bankruptcy and where the employee is under the jurisdiction of the court and the discharge is either granted by or is under a plan approved by the court.

Chief Financial Officer and Agency-Wide Shared Services Addresses

Addresses
CFO AWSS
Fax: (304) 254-5976 Fax: (512) 460-2548
Email: CFO.BFC.Debt.Collection.Helpdesk@irs.gov Email:
AWSSAUSPayrollSection1@irs.gov
Mail:
Internal Revenue Service
Beckley Finance Center
ATTN: Debt Collection Unit
P. O. Box 9002
Beckley, WV 25802-9002
Mail:
Internal Revenue Service
Austin Payroll Center
P. O. Box 934
MS 1550 - AUSC
Austin, TX 78767