1.36.4 Administrative (Non-tax) Debt Management

Manual Transmittal

May 04, 2020

Purpose

(1) This transmits new IRM 1.36.4, Administrative Accounting and Financial Management Reports, Administrative (Non-Tax) Debt Management.

Material Changes

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

(2) This IRM was originally published as 1.35.7, Financial Accounting, Debt Collection, on September 23, 2013. The chapter has been moved and the title has been renamed 1.36.4, Administrative (Non-tax) Debt Management.

Effect on Other Documents

IRM 1.35.7, dated September 23, 2013, is superseded.
This IRM incorporates Interim Guidance Memorandum CFO-01-0318-38, Interim Guidance on Changes to the Debt Collection Process, dated September 5, 2018.

Audience

All divisions and functions

Effective Date

(05-04-2020)

Ursula S. Gillis
Chief Financial Officer

Program Scope and Objectives

  1. Purpose: Provides processes and guidance for the collection of employee or former employee non-debt owed to the IRS.

  2. Audience: All current and former IRS employees (also referred to as debtors) who owe non-tax debts to the IRS.

  3. Policy Owner: CFO

  4. Program Owners: CFO Government Payables and Funds Management office and Human Capital Office (HCO).

  5. Primary Stakeholders: Employees, former employees and estates of former employees who have incurred non-tax debts to the IRS.

  6. Program Goals: Ensure employee debts owed to the IRS are resolved equitably and timely.

Background

  1. 31 U.S.C. Section 3711, Collection and Compromise, requires federal agencies try to collect debts owed to the United States government for money or property arising out of an agency’s activities. Chapter 37 of Title 31 of the United States Code (U.S.C.), Claims, provides policies and procedures that federal agencies shall use to collect non-tax debts owed to the United States by all persons or entities. These statutes are supplemented by provisions contained in Title 31, Part 5, Treasury Debt Collection and Parts 900-904, Federal Claims Collection Standards, of the Code of Federal Regulations (CFR) and provide additional policies and procedures for federal agencies collecting debts owed to the United States.

  2. Title 5 of the U.S.C. supplemented by provisions of Title 5, the CFR, provide additional policies and procedures that pertain to collection debts owed by civilian employees of the federal government.

Authorities

  1. The authorities for this IRM include:

    1. 5 U.S.C Section 4108, Employee Agreements; Service After Training

    2. 5 U.S.C Section 5514, Installment Deduction for Indebtedness to the United States

    3. 5 U.S.C Section 5524, Review of Accounts

    4. 5 U.S.C Section 5584, Claims for Overpayment of Pay and Allowances and of Travel, Transportation and Relocation Expenses and Allowances

    5. 5 U.S.C Section 8906, Contributions

    6. 11 U.S.C. Section 523(a)(8), Exceptions to Discharge

    7. 31 U.S.C Section 3701, Section 3711 Federal Claims Collection Act of 1966, as amended

    8. 31 U.S.C Section 3711 - 3720E, Claims of the United States Government

    9. 31 U.S.C Section 3717, Interest and Penalty on Claims

    10. 5 CFR Section 550.1104, Agency Regulations Governing the Collection of a Debt by Salary Offset

    11. 5 CFR Part 630, Subpart B, Definitions and General Provisions for Annual and Sick Leave

    12. 5 CFR Section 630.209, Refund for Unearned Leave

    13. 5 CFR Section 890.502, Withholdings, Contributions, LWOP, Premiums and Direct Premium Payment

    14. 31 CFR Part 285, Debt Collection Authorities Under the Debt Collection Improvement Act of 1996

    15. 31 CFR Section 5.12, How Will Treasury Entities Offset a Federal Employee's Salary to Collect a Treasury Debt?

    16. 31 CFR Parts 900-904, Federal Claims Collection Standards

    17. 41 CFR Chapters 300-304, Federal Travel Regulation

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

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

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

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

    22. Digital Accountability and Transparency Act of 2014, Pub. L. No.113-101

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

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

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

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

Responsibilities

  1. This section provides responsibilities for:

    1. CFO and deputy CFO

    2. Associate CFO (ACFO) for Financial Management and deputy Associate CFO (deputy ACFO) for Administrative Financial Management

    3. Travel Management

    4. Travel Operations

    5. Government Payables and Funds Management

    6. Government Payables

    7. Human Capital Office

    8. Payroll and Personnel Systems

    9. Labor Relations/Employees Resources Field Operations, Workforce Relations Division (WRD)

    10. Associate Chief Counsel (Finance and Management)

    11. Associate Chief Counsel (General Legal Services)

    12. Human Resources Division, Chief Counsel

    13. Payroll and Processing Branch, Chief Counsel

    14. Managers/supervisors

    15. Employees and former employees

CFO and Deputy CFO
  1. The CFO and deputy CFO are responsible for overseeing the IRS administrative debt collection program.

Associate CFO for Financial Management and Deputy Associate CFO for Administrative Financial Management
  1. The Associate CFO for Financial Management and the deputy Associate CFO for Administrative Financial Management are responsible for:

    1. Overseeing the administrative (non-tax) debt collection process.

    2. Submitting requests for legal opinions to Chief Counsel concerning whether termination or close out of debts is appropriate.

    3. Certifying and signing the Annual Certification Agreement for debt collection services under the Cross-Servicing program and Treasury Offset program.

Travel Management
  1. Travel Management is responsible for overseeing the Travel and Relocation submission of debts.

  2. Reviewing debtor requests for review of debt.

Travel Operations
  1. Travel Operations is responsible for:

    1. Ensuring files are retained with supporting documentation for all travel and relocation debt.

    2. Overseeing the travel and relocation post-audit process that identifies debt related to travel.

Government Payables and Funds Management
  1. Government Payables and Funds Management is responsible for:

    1. Overseeing the processing, collection and accounting of all administrative (non-tax) debts except for those that HCO has responsibility.

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

    3. Overseeing the negotiation and finalizing of inter-agency agreements for obtaining non-Treasury hearing officials for salary offset hearings.

    4. Certifying and submitting federal non-tax debt to the Bureau of the Fiscal Service (Fiscal Service) for collection services.

Government Payables
  1. Government Payables is responsible for:

    1. Managing the processing, collection and accounting for administrative (non-tax) debts, including posting and applying payments not addressed by HCO.

    2. Issuing debt letters and other correspondence for indebtedness except for taxes and salary debts.

    3. Receiving requests for petition for salary offset hearings or review of debt.

    4. Referring requests for petition of salary offset hearings to the non-Treasury hearing official.

    5. Referring debtor requests for review of debt to appropriate office.

    6. Serving as the deciding official on repayment agreements and financial hardship.

    7. Referring voluntary repayment agreements and delinquent administrative (non-tax) debts to the National Finance Center (NFC) for salary offset.

    8. Providing data for processing Form 1099-C, Cancellation of Debt.

    9. Referring employees with delinquent debts to the Workforce Relations Division (WRD).

    10. Consulting with Chief Counsel (Finance and Management) before suspending or terminating collection activity for debts of deceased employees and former employees.

    11. Consulting with Chief Counsel (General Legal Services) before continuing collection activities on debtors that have filed bankruptcy.

Human Capital Office
  1. Human Capital Office is responsible for overseeing the salary, leave and health benefits debt collection program.

Payroll and Personnel Systems
  1. Payroll and Personnel Systems is responsible for:

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

    2. Serving as the deciding official on repayment agreements and financial hardship considerations.

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

    4. Ensuring debt is correctly established in the NFC Administrative Billings and Collection System (ABCO).

    5. Notifying debtors of any salary, leave and health benefits indebtedness and their rights in accordance with the debt collection laws and regulations.

    6. Receiving debtor requests for petition for salary offset hearings or review of debt.

    7. Reviewing debtor requests for review of debt and corresponding with debtor.

    8. Referring requests for petition for salary offset hearing to Government Payables and Funds Management office.

    9. Consulting with Chief Counsel (Finance and Management) before suspending or terminating collection activity for debts of deceased employees and former employees.

    10. Assisting the Payroll and Processing Branch in the collection of non-tax debts from Chief Counsel employees by providing the Payroll and Processing Branch with suitable debt letters to be sent to those employees.

    11. Providing information for processing Form 1099-C, Cancellation of Debt for issuance by NFC.

    12. Referring employees with delinquent debts to the Workforce Relations Division (WRD)

    13. Consulting with Chief Counsel (General Legal Services) before continuing collection activities on debtors that have filed for bankruptcy.

Labor Relations/Employee Resources Field Operations
  1. LR/ER Field Operations, WRD, is responsible for:

    1. Providing guidance to management related to potential disciplinary action resulting from administrative indebtedness, including failure to satisfy in good faith, just financial obligations and failure to manage or honor private financial affairs where IRS operations or reputations are affected.

Associate Chief Counsel (Finance and Management)
  1. The Associate Chief Counsel (Finance and Management) is responsible for overseeing the debt collection program involving Chief Counsel employees.

Associate Chief Counsel (General Legal Services)
  1. The Associate Chief Counsel (General Legal Services) is responsible for providing legal opinions as to whether termination or close out of debts is appropriate.

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

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

    2. Serving as the deciding official on repayment agreements and financial hardship considerations requested by Chief Counsel employees.

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

    1. Managing the collection of, processing of and accounting for salary, leave and health benefits debts.

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

    3. Issuing debt letters and other correspondence for indebtedness for salary, leave and health benefits debts.

    4. Receiving debtor requests for salary offset hearings and referring the requests to the Associate Chief Counsel (Finance and Management).

    5. Recommending actions for administrative debts submitted for termination of collection and write-off.

    6. Consulting with Chief Counsel (Finance and Management) before suspending or terminating collection activity for debts of deceased employees and former employees.

    7. Referring employees with delinquent debts to the director, Employee and Labor Relations Division for any appropriate disciplinary action.

Managers/Supervisors
  1. Managers/supervisors are responsible for evaluating financial activity that could potentially lead to an employee debt by:

    1. Validating time and attendance records for accuracy.

    2. Examining and certifying travel vouchers for accuracy.

    3. Initiating timely personnel action requests.

    4. Reporting errors immediately to the applicable program office.

    5. Reinforcing IRS’s requirements for financial responsibility.

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

  2. Employees are responsible for ensuring time and attendance is posted accurately, reviewing earnings and leave statements and reviewing their Standard Form 50 (SF-50) to ensure increases in pay are correct.

  3. Employees have a responsibility to notify the IRS of errors and are expected to repay salary overpayments.

  4. Employees and former employees are responsible for responding timely to debt letters and paying all undisputed administrative debts.

Program Management and Review

  1. Program reports are used for collecting and measuring data needed for the program objective:

    1. The IRS must execute a certification agreement annually to Treasury that delinquent non-tax debts referred to Treasury for collection purposes were valid and legally enforceable.

    2. HCO Austin Payroll Center uses the Payroll and Personnel Systems (PPS) Measures Dashboard Report to determine if the IRS is collecting non-tax debts owed and to identify outreach opportunities that could prevent debt creation.

    3. HCO Austin Payroll Center generates reports from the NFC’s ABCO system to monitor employee and former employee non-tax debt information.

    4. HCO Debt Management uses the PPS monthly measure report to obtain a summary of IRS non-tax debt that shows current debt information for all active, non-pay status and separated employees.

    5. Government Payables & Funds Management uses monthly reports to monitor the status of aging debt and delinquent debts submitted for collections.

    6. The Treasury Report on Receivables (TROR) is the Treasury’s comprehensive means of collecting data on the status and condition of the federal government’s non-tax debt portfolio.

  2. Program Effectiveness:

    1. The Government Payables & Funds Management office measures effectiveness of the program by ensuring the referral of delinquent non-tax debts to the National Finance Center 30 days after final due process or 90 days delinquent and to Fiscal Service for collection when delinquent more than 120 days.

    2. The HCO measures effectiveness by verifying continued employment for salary offset or the need to refer to Fiscal Service for collection if no longer employed by the Service and delinquent more than 120 days.

Program Controls

  1. Program controls for administrative non-tax debts owed to the IRS include:

    Control Control Method
    Validations
    All requests for accounts receivable contain dual levels of approval from the requesting area prior to submission to the Debt Collection Unit to ensure validity of the debt. Dual levels of approval are also completed by the Government Payables Unit before and after establishment to ensure accuracy and completeness
    Documentation/Retention The applicable business unit maintains all supporting documentation. Government Payables & Funds Management ensures the inclusion of the supporting documentation with the account receivable request and maintains both in their files.
    Reporting Monthly reports are provided to the Government Payables section chief and the Government Payables & Funds Management director on the status of open debt to monitor aging debt and to ensure delinquent debts are submitted to Fiscal Service’s Debt Management Services or NFC timely.
    Confidential Data HCO and Government Payables & Funds Management use restricted access sites to store employee debt information.

Terms/Definitions

  1. The following terms and definitions apply to this program:

    1. Account receivable - An amount owed to the government by an individual organization or other entity to satisfy an administrative (non-tax) debt or claim.

    2. Administrative debt - A debt that occurs because of administrative actions.

    3. Administrative wage garnishment (AWG) - The withholding of a portion of a debtor’s non-federal pay to satisfy an administrative (non-tax) debt owed to the IRS.

    4. Appeal - An administrative proceeding in which the debtor requests a higher management official review of the determination that he or she owes all or part of the debt.

    5. Automatic stay - The statutory court order that prohibits the Department of the Treasury from pursuing further collection action against the debtor while the debtor’s bankruptcy is pending.

    6. Bankruptcy - A legal procedure established under Title 11, Chapters 7, 11 and 13 of the United States Code (Bankruptcy Code) whereby the debtor may seek relief from the claims of a creditor.

    7. Compromise - Acceptance of less than the full amount of the debt owed from the debtor in satisfaction of the debt.

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

    9. Cross-servicing - The process whereby agencies refer delinquent federal administrative (non-tax) debt to the Fiscal Service for enforced collection.

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

    11. Debt collection - The recovery, in full or in part, of an administrative (non-tax) debt owed to the IRS through the receipt of money, either in the form of a check, money order or by electronic means.

    12. Default - Failure to meet a financial obligation.

    13. Delinquent - A debt that is not paid by the due date specified in the debt letter or for which payments are not received in compliance with the terms of an approved repayment agreement.

    14. Disposable pay - The amount of an employee's wages that 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.

    15. Due process - The requirement to give the debtor notice of an administrative (non-tax) debt and the opportunity to dispute the debt and intended collection action.

    16. Enforced salary offset - The process of collecting a percentage of an employee's current salary to satisfy a delinquent administrative (non-tax) debt.

    17. Financial hardship - An inability to meet the basic living expenses for goods and services necessary for the survival of the debtor, their spouse and any dependents.

    18. Health insurance receivable - A debt established to recover advanced employee salary submitted by the IRS to the insurance carrier to pay an employee’s share of Federal Employee Health Benefit (FEHB) premiums during a period of non-pay or insufficient pay status.

    19. Interest - The amount assessed on delinquent debts 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.

    20. Lump sum payment - A single non-recurring payment to pay a debt in full.

    21. Overpayment - Any amount paid that is more than the amount owed to the employee and to which he or she is not entitled.

    22. 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.

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

    24. Private collection agency - A private-sector entity whose primary business is the collection of delinquent debts.

    25. Repayment agreement - A written contract in which the debtor agrees to pay the debt via periodic installments.

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

    27. Salary debt - A debt that occurs because of pay and leave actions, including debts resulting from benefits activities.

    28. Salary offset - The process of collecting a percentage or set dollar amount of the employees’ current salary to repay a debt.

    29. Treasury Offset Program (TOP) - A Fiscal Service program that offsets all eligible federal payments for repayment of delinquent debt.

    30. Wage garnishment - The process of withholding amounts for delinquent administrative (non-tax) debt from the debtor’s disposable non-federal wages and paying those amounts to the government in accordance with a withholding order.

    31. Waiver - In accordance with an appropriate statute, the cancellation, remission, forgiveness or non-recovery by the creditor agency of an administrative (non-tax) debt owed to that agency and generally initiated as a result of the debtor’s request.

    32. Waiver request - A petition seeking relief from paying an administrative (non-tax) debt.

Acronyms

  1. The following acronyms apply to this program.

    Acronym Meaning
    DOJ Department of Justice
    ESP Emergency Salary Payment
    FEHB Federal Employees Health Benefits
    Fiscal Service Bureau of the Fiscal Service
    NFC National Finance Center
    PPS Payroll & Personnel Systems
    TOP Treasury Offset Program
    WRD Workforce Relations Division

Related Resources

  1. Related resources for this IRM include:

    1. IRM 1.32.1, Servicewide Travel Policies and Procedures, IRS Local Travel Guide

    2. IRM 1.32.4, Servicewide Travel Policies and Procedures, Government Travel Card Program

    3. IRM 1.32.11, Servicewide Travel Policies and Procedures, IRS City-to-City Travel Guide

    4. IRM 1.32.12, Servicewide Travel Policies and Procedures, IRS Relocation Travel Guide

    5. IRM 1.32.13, Servicewide Travel Policies and Procedures, Relocation Services Program

    6. IRM 1.35.7.8.4, Federal Employees Health Benefits Premiums

    7. IRM 1.35.13, Financial Accounting, Administrative Waiver

    8. IRM 6.550.1, Pay Administration (General)

    9. IRM 6.610.1, IRS Hours of Duty

    10. IRM 6.630.1, Absence and Leave

    11. IRM 1.2.2.2.13, Delegation Order 1-15, Waiving Claims Against Current or Former Employees for Erroneous Payments

    12. IRM 1.2.2.2.14, Delegation Order 1-16, Agency Collection Action

    13. Federal Employees Health Benefits (FEHB) Program Handbook

    14. Federal Employees Group Life Insurance (FEGLI) Program Handbook

    15. IRS Employee Resource Center website

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

Debts Arising from Pay and Leave Actions

  1. Employees may incur debts that arise as the result of pay and leave actions including but not limited to:

    1. Emergency salary payments (ESP)

    2. Advanced leave

    3. Salary overpayments

    4. FEHB Premiums

Emergency Salary Payments

  1. An ESP may be issued to replace a salary payment not received by the employee or that NFC did not generate due to an administrative error. An ESP is a loan from the IRS Accounting Office and must be repaid upon receipt of your regular salary.

    1. An ESP is collected from the debtor’s next salary payment.

    2. Any ESP not repaid by the end of the year it was received is subject to income tax withholding and is reported on the debtor’s Form W-2, Wage and Tax Statement.

Advanced Leave

  1. Advanced leave is subject to repayment. See IRM 6.630.1.6.3, Payment of Advanced Leave by Separating Employees and IRM 6.630.1.6.4, Payment of Advanced Leave While Currently Employed, for further information.

Salary Overpayments

  1. Salary overpayments are erroneous payments that arise from administrative discrepancies from:

    1. Time and attendance transactions

    2. Payroll processing

    3. Personnel actions by either the employee or the IRS

  2. Salary overpayments also include errors in processing federal employee health benefits that 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. Employees have a responsibility to notify the IRS of errors and are subject to repay salary overpayments, including those caused by the IRS.

  4. The IRS notifies the debtor 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 debt letter will result in the debt being considered delinquent.

  5. If a salary overpayment is $50 or less, the IRS may automatically recover it from an employee’s salary payments within four pay periods following the overpayment. The individual must be provided written notice of the nature and the amount of the adjustment and a point of contact for contesting the adjustment (5 U.S.C Section 5514(a)(3)), Installment deduction for indebtedness to the United States.

  6. A debtor who receives an erroneous salary overpayment may request a waiver of repayment. See IRM 1.35.13, Financial Accounting, Administrative Waiver, for more information.

  7. Salary overpayments not repaid in the same year as received are considered taxable income and reported on Form W-2, Wage and Tax Statements, as applicable.

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 portion of the premium being withheld from his or her salary each pay period. An employee may incur a debt when he or she cannot pay his or her share of the premium because the employee:

    1. Entered a non-pay status.

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

    3. Experienced a life event that requires special processing.

  2. Public Law 104-208, Omnibus Consolidated Appropriations Act, requires agencies to remit the full FEHB premium (both employer and employee shares) on a current basis for employees who are in a non-paying status and/or who receive salary that is insufficient to pay their share of the FEHB premium. Federal employees may elect to continue their enrollment for a period not to exceed one year during which time the employing agency may approve advanced pay to cover the employee’s share of the FEHB premium per 5 U.S.C Section 8906e, Contributions. If advanced pay is necessary to cover the employee’s share of their FEHB premium, the employee is obligated to repay the IRS under 5 U.S.C Section 5524, Review of accounts.

  3. If the employee elects to continue coverage while in a leave without pay status but does not pay their health insurance premiums, the employee is indebted to the IRS. A receivable is established for the debtor’s share of the health insurance premiums. When the debtor returns to pay status, collection on this debt is made per 5 CFR Section 890.502, Withholdings, Contributions, LWOP, Premiums and Direct Premium Payment.

  4. A debtor’s request for FEHB premium advances during periods of non-pay or insufficient pay status and payment upon that request does not result in an erroneous payment. The IRS does not have the authority to waive the collection of FEHB debts.

  5. 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.

Various Actions that Establish Debt

  1. Some of the more frequent actions that establish debt are:

    1. Travel Transactions

    2. Relocation Transactions

    3. Training

    4. Restitutions

  2. When a debtor does not repay the outstanding balance or fails to submit a voucher to account for the travel or relocation expenses, the entire amount of the outstanding balance becomes due and payable and is subject to enforced collection action.

  3. When a debt is referred to Fiscal Service, the Treasury Offset Program (TOP) offsets federal payments due to the debtor. This includes the federal salary travel advances, travel or relocation voucher reimbursements, tax refunds and federal retirement payments.

Travel Transactions

  1. Debts arising from travel transactions include:

    1. Travel advances - If a trip is canceled or postponed or the travel authorization has expired, the debtor must repay the outstanding balance of any advance not liquidated in the travel system.

    2. Travel overpayments and corrections to original travel vouchers - Post audit reviews are randomly conducted of e-travel vouchers from the electronic travel system to identify discrepancies.

    3. Overpayments not repaid in the same year as received are considered taxable income and reported on Form W-2, Wage and Tax Statements, as applicable.

    4. See IRM 1.32.1, Official IRS Local Travel guide and IRM 1.32.11, Official IRS City-to-City Travel Guide for additional information.

Relocation Transactions

  1. Debts arising from relocation transactions include:

    1. 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.

    2. Service agreements - When an employee violates a service or transportation agreement or fails to affect the transfer or appointment, the employee must reimburse the amount expended by the IRS.

    3. Transportation of household goods - When the weight of an employee's household goods exceeds the maximum allowable limit, the employee must reimburse the IRS for the transportation costs and other charges for the excess. Employees must reimburse the IRS for unauthorized services performed by the mover or third-party service provider. See IRM 1.32.12, Servicewide Travel Policies and Procedures, IRS Relocation Travel Guide and IRM 1.32.13, Servicewide Travel Policies and Procedures, Relocation Services Program for additional information.

    4. Withholding Tax Allowance is calculated and applied to an employee's relocation voucher on the employee's behalf. When an employee’s adjusted gross income is below the 27% level rate used to compute Withholding Tax Allowance, the IRS determines the amount of federal taxes the employee is responsible to reimburse for the overpayment.

    5. Relocation overpayments and corrections to original relocation vouchers are audited upon receipt and any discrepancies.

Training

  1. A debtor may incur a non-tax debt to the IRS resulting from the employee’s breach of agreement for the IRS’s investment in the employee’s training.

    1. The IRS may offer to pay for an employee to attend courses that enable employees to meet a career learning plan milestone or competency need. This benefit may be contingent upon the employee agreeing to complete the course satisfactorily by receiving a passing grade of a “C” or higher, certification or other suitable documentation of satisfactory completion. Employees who do not satisfactorily complete the course may be required to reimburse the IRS for costs incurred.

    2. IRM 6.410.1.2.16.2(5), Learning and Education, SF-182 Process, states “if the employee voluntarily leaves the government before the agreed upon length of service is completed, the 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.”

Restitutions

  1. A restitution debt occurs when a debtor is held liable for a loss incurred by the IRS because of negligent, willful, unauthorized or illegal acts by an employee or former employee that 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. Unauthorized 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 or former employee is responsible for compensating the IRS for restitution debts.

  3. For additional information about improper purchases, see the Employee Resource Center website for the Restricted Purchase List.

Debt Letter and Due Process Rights

  1. Federal debt collection statutes require the IRS to provide employees with debt letters and due process rights under the Debt Collection Act of 1982 and the Debt Collection Improvement Act of 1996.

  2. The letter outlines the following information:

    1. The type, nature and amount of the debt.

    2. The payment due date to avoid the debt becoming delinquent.

    3. Payment instructions and the IRS point-of-contact.

    4. Repayment options available to the debtor.

    5. IRS policies for accruing interest, administrative charges and penalties on delinquent debts.

    6. Instructions to dispute the amount or the existence of the debt.

    7. Instructions to request a review of the debt or inspect and copy IRS records related to the debt.

    8. Filing instructions to petition for a salary offset hearing before a non-Treasury official, if applicable.

    9. Steps for requesting an internal review of the debt (paper hearing), if applicable.

    10. The collection actions IRS may take to enforce collection if the debt is not paid by the payment due date. This includes commencing enforced salary offset for current employees, referring the debt to Fiscal Service for collection by offset or a private collection agency, reporting the debt to a credit reporting bureau or referring the debt to the Department of Justice (DOJ).

    11. Instructions for submitting a financial hardship request.

    12. Instructions for requesting a waiver of the debt, if applicable.

    13. Instructions for Waiver Requests. See IRM 1.35.13, Financial Accounting, Administrative Waiver for additional information regarding the waiver process.

Delinquency

  1. A debt is delinquent if it has not been paid by the date specified in the IRS’s debt letter.

  2. If a debtor enters into an applicable payment agreement, the debt becomes delinquent when it has not been paid pursuant to the terms of the repayment agreement.

  3. If a debtor fails to respond to the debt letter, the debt is considered delinquent as of the date the original notice was mailed. Interest, administrative charges and penalties are added to the unpaid balance and the IRS will begin enforced 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 arises, unless the debt is paid in full within the grace period. The Current Value of Funds Rate is based on the Treasury Tax and Loan Rate to the nearest whole percent.

  2. Interest is assessed on the principal balance and the rate remains fixed for the duration of the debt without compounding.

Administrative Charges

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

Penalties

  1. The penalty rate the IRS assesses is set by law, 31 U.S.C. Section 3717, Interest and penalty on Claims. Penalties accrue on all amounts (principal, interest and administrative charges) that remain outstanding for more than 90 calendar days. The penalty accrues from the date of delinquency.

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), of the Federal Claims Collection Standards when:

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

    2. The debt is waived as part of a compromise.

  2. Interest, administrative costs and penalties are not imposed for any period during which collection activity has been suspended pending agency review.

  3. The IRS may waive the collection of interest, administrative charges and penalties 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. Pursuant to 31 CFR 901.9(f), Federal Claims Collection Standards, the IRS applies delinquent debt payments received against the outstanding balance of a debt in the following order:

    1. Penalties

    2. Administrative charges

    3. Interest

    4. Principal

Debts Referred to NFC

  1. A debt owed to the IRS by one of its employees is subject to enforced salary offset when the debt becomes delinquent.

  2. Enforced salary offset may be initiated unless a debtor repays the debt in a lump sum by the date provided in the debt letter or establishes a repayment agreement and maintains the terms of the agreement.

  3. Each debtor’s delinquent debt is subject to a 15% withholding from their disposable pay each pay period unless the debtor:

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

    2. Agrees in writing to a repayment agreement at a percentage greater than 15%.

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

    4. Requests a salary offset hearing before a non-Treasury hearing official and the hearing official orders that a lesser amount be withheld from the debtor’s disposable pay.

    5. Requests a waiver or review of the debt.

  4. Under enforced salary offset for paying a non-tax debt to the IRS, the amount deducted for any period may not exceed 15% of disposable pay (5 U.S.C Section 5514(a)(1)), Installment deduction for indebtedness to the United States.

  5. The IRS terminates enforced salary offset when the full amount of the debt is collected or the debtor separates from the IRS. However, after the employee separates from the IRS (either voluntarily or involuntarily), the IRS imputes a lump sum deduction exceeding 15% of disposable pay from any final salary payments, which might include accrued leave, etc., to satisfy the debt.

Debts Referred to Fiscal Service

  1. The Digital Accountability and Transparency Act of 2014 requires agencies to refer all non-tax debts or claims owed to the government that are delinquent for more than 120 calendar days for cross-servicing to the Department of the Treasury, Fiscal Service.

  2. An administrative (non-tax) debt is eligible for referral to Fiscal Service if the delinquent debt is legally enforceable and greater than $25.

  3. When the IRS refers a debt to Fiscal Service for enforced collection, Fiscal Service assesses contingency fees and deducts them from amounts collected from the debtor. The balance of the payment is applied to the delinquent debt using the order described in IRM 1.36.4.6, Application of Payments.

  4. The IRS does not refer a debt to Fiscal Service if:

    1. A waiver request is pending.

    2. The employee has filed for bankruptcy protection or the debt has summarily been discharged by bankruptcy proceeding.

    3. The debtor is deceased.

  5. The IRS stops all collection activity after the debt is referred to Fiscal Service.

  6. Information on Fiscal Service debt collection program is available on Fiscal Service website.

Cross-Servicing Program

  1. When a debt is referred to Fiscal Service, the IRS is certifying in writing, under the penalty of perjury, that to the best of their knowledge and belief that:

    1. The debt is valid and is not subject to any circumstances that legally preclude collection.

    2. There are no pending appeals.

    3. The debtor has been given the required notice of due process.

  2. Fiscal Service uses several debt collection methods:

    1. Mailing letters and following up with phone calls.

    2. Negotiating payment agreement options.

    3. Reporting debts to credit bureaus.

    4. Referring debts to the Treasury Offset Program.

    5. Referring debts to the Administrative Wage Garnishment Program.

    6. Referring cases to private collection agencies and the DOJ.

  3. Fiscal Service maintains debt balance information, collects the funds paid by the debtor and returns the funds to the IRS for proper processing, accounting and application to the debt.

  4. Fiscal Service charges contingency fees for its incurred costs related to the Cross-Servicing Program.

  5. 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.

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

    1. Contingency fees

    2. Penalties

    3. Administrative costs (other than contingency fees)

    4. Interest

    5. Principal

  7. Fiscal Service refers debts to the DOJ for litigation when aggressive collection activity has been attempted and the debt cannot be compromised, suspended or terminated.

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

  2. When a debt is referred to TOP for collection, Fiscal Service is authorized to seize federal payments due to the debtor and apply it to the debt balance.

  3. Federal law limits the amount that may be withheld from some types of federal payments that are subject to certain exemptions and limitations. Examples of federal payments eligible for offset include:

    1. Tax refunds.

    2. Wages, including military pay.

    3. Travel advances and reimbursements.

    4. Certain federal benefit payments including Social Security benefits (other than Supplemental Security income), Railroad Retirement benefits (other than tier 2) and Black Lung (part B benefits).

    5. Other federal payments that are not exempt by law or by action of the Secretary of the Treasury.

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

  5. For debtors with multiple debts, Fiscal Service applies the collections to the debtor in the following order:

    1. IRS income tax debts

    2. Child support debts

    3. Federal non-tax debts

    4. State income tax debts

  6. When a debtor owes multiple similar debts (for example, income tax debts for multiple years), Fiscal Service applies collections to liquidate the oldest debt first.

Private Collection Agencies
  1. Fiscal Service may refer delinquent uncollected debts to private collection agencies 30 calendar days after the date Fiscal Service issues a debt letter.

  2. A private collection agency remits any collections received to Fiscal Service. Fiscal Service remits the funds to the IRS with supporting detailed debt information. Private collection agencies net fees for collecting debts against the amount collected before remitting the funds to Fiscal Service.

Administrative Wage Garnishment
  1. Administrative Wage Garnishment (AWG) is a collection tool that Fiscal Service uses to collect delinquent debt from:

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

    2. Non-Federal employees.

  2. Debtors that object to garnishment of their wages can request a hearing from Fiscal Service.

  3. Additional information on Administrative Wage Garnishment is available on the Fiscal Service website.

Bankruptcy

  1. The IRS is generally prohibited from pursuing further collection action due to an automatic stay when a debtor files for bankruptcy protection effective the date of the filing of bankruptcy.

  2. Fiscal Service returns previously referred delinquent debts to the IRS when Fiscal Service determines the debtor has filed for bankruptcy protection.

  3. If a debt is discharged by the bankruptcy court, the IRS is precluded from pursuing collection on the debt incurred by the debtor.

  4. Generally, under 11 U.S.C. Section 523(a)(8), Exceptions to Discharge, Tuition Assistance Program debts are not dischargeable unless a bankruptcy court has found that enforcing the debt would impose an undue hardship on the debtor or their dependents.

  5. If the bankruptcy case is dismissed by the bankruptcy court, the IRS continues enforced collection efforts.

  6. The IRS may begin enforced collection on any debt incurred after the bankruptcy petition has been filed and where an automatic stay is not in effect.

Retirement and Separation

  1. Employees are responsible for satisfying debts owed to the IRS prior to separation or retirement. The debtor must contact HCO or Government Payables & Funds Management prior to leaving the IRS to discuss payment arrangements for any unpaid debt.

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

  3. An employee's final salary payment and 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% disposable pay limit does not apply. If the entire debt is not satisfied, the IRS will establish a receivable for the remaining balance and begins collection activity.

  4. When an employee retires with an existing salary debt, the NFC notifies the Office of Personnel Management to garnish retirement benefits.

  5. For additional information:

    1. See "Schedule of Separation Actions" in the Retirement chapter of Document 9669, Employee Personnel Resource Guide.

    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 matter will be referred to the Treasury Inspector General for Tax Administration (TIGTA) or Chief Counsel for referral to the DOJ.

Termination of Debts

  1. Per the Debt Collection Act of 1982 and OMB Circular No. A-129, Policies for Federal Credit Programs and Non-Tax Receivables, debts are terminated when:

    1. The IRS is unable to collect any substantial amount through its own efforts or through the efforts of others or the debtor is not able to be located.

    2. The debt cannot be substantiated.

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

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

    5. The debt has been discharged in bankruptcy.

  2. If an employee debt is terminated and is $600 or more, the amount is reported on Form 1099-C, Cancellation of Debt, except when it is discharged by bankruptcy or the debtor is under the jurisdiction of the court for remedy. If interest is incurred from the cancelled debt, the interest portion is recorded in the financial system and reported separately in box 3 of the 1099-C. Aggregation of debt is allowed, but not required.

  3. See 26 CFR Section 1.6050P-1, Information reporting for discharges of indebtedness by certain entities, for more information.