The Government Can Collect Many Delinquent Debts by Keeping Federal Tax Refunds as Offsets

FGMSD-79-19: Published: Mar 9, 1979. Publicly Released: Mar 9, 1979.

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An evaluation was conducted to determine the feasibility of collecting accounts receivable by reducing future tax refunds. Over $400 million in non-tax receivables was written off by the government in fiscal year 1978.

A considerable portion of those non-tax accounts could be collected by reducing future income tax refunds due to debtors. Such an off set procedure would be resorted to only after traditional collection efforts have failed. The Internal Revenue Service's (IRS) present collection system could be adopted to match refunds with delinquent debts so that the debtor's refund would be retained to cover the debt. The federal government's right to collect delinquent debts by offsetting against amounts due the debtors is strongly supported by statutes and court decisions. This method would not result in the illegal disclosure of any individual tax return information.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should provide any funding that may be necessary for IRS to obtain the staffing necessary to accomplish the additional work load imposed by testing and adopting the offsetting collection method.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Commissioner of Internal Revenue should implement, on a test basis, procedures which: (1) provide for agencies to refer delinquent receivables to IRS after the agencies have exhausted all collection efforts open to them; and (2) screen federal income tax refunds against these delinquent debts and withhold all or the available part of any refunds due to satisfy the delinquent debts. Before beginning the test, the Commissioner should advise Congress of the agency's goals, timeframes for achieving them, methodology, and approach.

    Agency Affected:


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