Frequently Asked Questions for State Agencies
The Treasury Offset Program (TOP) will only offset a payment up to the amount of the debt balance. Some payments, especially those for larger amounts, are transmitted by a service called Fedwire. Fedwire is often used when payments must be applied and credited immediately upon receipt. Fedwire payments do not currently get offset through TOP. So, Fedwire payments made to payees with delinquent debts in TOP are blocked.
When an attempted Fedwire payment is blocked, a paying agency should then make the payment through the automated clearing house (ACH). ACH payments are offset through TOP. Any amount over the debt balance remaining after offset funds are applied to the debt or debts will be disbursed to the payee. TOP removes the Fedwire block the day after a debt is resolved.
Debts owed by a state will only stop payments up until the debt balance. If an entity is indebted to any federal agency, payments will not be disbursed to that entity through the Fedwire system, but can be disbursed through the ACH process. While this might hold up your payment from being received by a day, a payee will receive the funds, less the amount owed to the federal government.
The payee should contact the paying agency and ask them to disburse the payment through the ACH. ACH payments settle the day after the payment is disbursed. ACH payments can be offset which means that if the payment is sent via ACH and the delinquent debt is still valid, the ACH payment may be offset for up to the full amount of the debt. You should also contact the agency to which you owe the debt to pay or otherwise resolve the indebtedness.
If a payee wants the block removed on Fedwire, the payee needs to repay the delinquent debt owed to the creditor agency or otherwise resolve the debt.
At the time a payment is offset, TOP sends a notice to the payee. In addition, the TOP staff can provide reports to states, businesses, and other entities to help identify delinquent nontax debts owed by the state, business, or other entity to the federal government. TOP staff can send you a report with the appropriate creditor agency contact information at the beginning of each month to assist with resolving these offsets.
To receive this report, TOP staff needs to receive a written authorization from your State Comptroller or appropriate business official to release this information. The authorization should provide the name of a central point of contact, along with an address, telephone number, e-mail and postal mailing address.
For additional information about this service and the assistance we can provide, please call the TOP Call Center toll free at 800-304-3107.
Hearing impaired customers may use the Federal Relay Service by dialing 800-877-8339 to reach a Communications Assistant (CA) who will dial the toll free number.
If the IRS has served a levy on the Bureau of the Fiscal Service , through TOP, to collect a delinquent tax debt owed by an entity, the Bureau of the Fiscal Service will also block Fedwire payments to that payee. At the time the payment is made through ACH or other means, TOP will send a notice to the contact and address associated with the debt, unless the ACH payment file contains a payee mailing address.
The Internal Revenue Code prohibits Fiscal Service from disclosing to any representatives of a delinquent taxpayer entity any information about the tax debt, including that it exists or that a levy to collect the debt was the reason for the payment being blocked or reduced.
The only exception to this prohibition is the notice sent at the time of offset (the reduction or withholding of a payment). If a state Fedwire payment was blocked and then reduced upon payment, but the TOP staff cannot identify any nontax debts available for offset, the entity should contact the IRS at 800-829-1040 to inquire about whether the payment was levied.
Individuals, businesses, and states owe many types of nontax debts to the federal government, including, for example, grant overpayments, loans, overpayments on projects, and debts owed to Medicare.
Creditor agencies must provide debtors with notices of their debts explaining their rights and opportunities to resolve or dispute their debts. Creditor agencies must send these notices to the last addresses on record.
The state should contact the creditor agency collecting the debt, which is listed on the due process notice. If the state needs information about whom to contact, they may call the TOP Call Center toll free at 800-304-3107. The state must work with the creditor agency to satisfy its indebtedness in order for the debt to be removed from TOP. Treasury does not make the determination regarding removing the debt from TOP.
The state should contact the creditor agency collecting the debt, which is listed on the notice. If the state needs information about whom to contact, they may call the TOP Call Center toll free at 800-304-3107. The state must work with the creditor agency to establish an appropriate payment plan.
In most cases, the creditor agency can send a debt to TOP if it is more than 60 days delinquent. The creditor agency must determine that the debt is valid and legally enforceable. The agency must send a notice about the debt to the last address it has on file and provide the debtor with the opportunity to resolve or dispute the debt. Once this has been done, your debt is eligible for offset.
All federal payments are subject to offset except:
- Payments exempted by statute (e.g. student loan payments, veterans' benefits)
- Payments exempted by the Secretary of the Treasury
Exemptions apply to classes of payments, not to classes of debtors or to individual payees. A list of exempt payment types is available here.
States should contact the federal or state agency collecting the debt which is listed in the notice they receive. If no notice was received, the state should contact the TOP Call Center toll free at 800-304-3107 to obtain contact information.
TOP does not interface with the Fedwire system at this time. For this reason, federal agencies may not use Fedwire to pay entities that owe delinquent debts to the federal government. They can receive their federal payments using other federal payment methods that interface with the TOP system, which will make their payments available for offset.
The taxpayer identification number or "TIN" is used to identify the entities liable for a federal debt. Any payment to an entity using the same TIN as the debtor is eligible for offset or levy to collect the debt.
Last modified 05/23/18