When The Government Can Keep Your Tax Refunds And Disability Checks

In layman's terms, administrative offset is the government's way of applying money that would normally be owed to you, such as tax refunds and certain Social Security benefits, to outstanding debts that you owe. State payments to you may also be subject to administrative offset. If you are a federal government employee, a portion of your wages may be garnished in this fashion.

Administrative offsets are handled by the Department of Treasury through the Treasury Offset Program (TOP). Types of debt subject to offset include defaulted federal student loans, delinquent taxes and child support payments.

The payments subject to administrative offset depend on the type of debt and whether the action is being taken through the Administrative Offset Program or the Federal Tax Refund Offset Program. Income streams that may be offset include tax refunds, federal wages, military pay, retirement pay, Social Security benefits, some disability benefits and other federal payments that aren't specifically exempted.

The long list of federal payments exempt from administrative offset includes SSI, Tier 2 railroad retirement benefits, Black Lung benefits other than part B, and various emergency and low-income payment programs.

Social Security Disability Benefits (SSDI) are subject to offset, but Supplemental Security Income (SSI) benefits are not. SSDI is based on your work record while SSI is based on financial need. The administrative offset program exempts garnishment beyond a certain level of financial need.

Generally, administrative offsets are limited to no more than 15 percent of your total benefits and can't be applied to total benefit amounts below $750 per month, or $9,000 per year.

Before any administrative offset is initiated, you'll receive a written notice from the government explaining the amount and nature of the debt. Generally, you will have sixty days from the date of the notice — not the date you receive it — to take any defensive actions.

You have the right to review the records relating to the debt, and request copies if you or your representative can't personally review the records. You can request a review of your case within twenty days of receipt of the notice. If you request and receive documents regarding the case, you have fifteen days from the receipt of those documents to request a review – but all this must take place within the sixty-day window.

If you feel the debt is in error, you can submit copies of evidence showing you owe only part or none of the debt.

If the debt is yours, you can pay the debt within the 60-day period, request a hardship reduction or negotiate an installment payment plan. To claim hardship, you will need to provide detailed financial information and a letter explaining the "exceptional circumstances" that caused the hardship.

Otherwise, garnishments will begin and continue until the debt is fully paid off, with interest. For high levels of debt such as defaulted student loans, garnishments can run for years – even decades.

If you receive an administrative offset notice, it's important to react as soon as possible. To resolve any questions not covered in your notice, consult the TOP website.

Don't ignore an administrative offset notice. If you feel the notice has been sent in error, seek legal advice immediately. Unless you have the time, patience, and expertise to sift through the exceptions in thick legalese, you'll need assistance that's tailored to your situation.

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