Offset of Individual Income Tax Refunds
This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (Department) until amended. A guidance document does not include internal procedural documents that only affect the internal operations of the Department and does not impose additional requirements or penalties on regulated parties or include confidential information or rules and regulations made in accordance with the Administrative Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on regulated parties, you may request a review of the document.
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The Nebraska Department of Revenue (Department) has the authority to administer and participate in different programs through which an individual’s income tax refund may be used to offset certain past-due debts. An offset of an individual’s income tax refund means that part or all of these refund amounts can be used to reduce or pay off the amount of the qualifying debts for state obligations.
The Department may capture Nebraska individual income tax refunds to offset any Nebraska income tax or Nebraska business tax liabilities dating back to 1968. If the taxpayer’s records at the Department indicate outstanding individual income tax balances or business tax balances for which the taxpayer is liable, these balances may be subject to offset by the amount of the taxpayer’s refunds. These taxpayers have previously been notified of the balances due, however the amounts remain unpaid. This offset will occur even if the Department is currently receiving payments to resolve these balances due. The Department will suspend collection if the debt is subject to a bankruptcy stay or if other reasons justify suspension.
- The Department has participated in the Treasury Offset Program (TOP) since 2004. The TOP is administered by the U.S. Department of Treasury Financial Management Service (FMS). The FMS, which issues Internal Revenue Service (IRS) tax refunds, has been authorized by Congress to conduct the TOP. Through this program, federal refunds may be reduced to offset certain past-due debts, including state income tax obligations. For more information see the U.S. Department of the Treasury's website.
Each year, the Department goes through a certification process before new tax balances are submitted to the TOP. As a part of this certification process, the Department sends a notice to taxpayers who have income tax balances that are subject to the offset. That notice explains the amount owed, the rights available to the taxpayer, and that the Department intends to collect the amount owed by intercepting any federal payments made to them, including tax refunds.
Individual state income tax balances from the previous 10 tax years may be subject to the TOP offset. A newly created state income tax balance may be excluded from offset if the amount was not included in the certification process. This offset will occur even if the Department is currently receiving payments to resolve these balances due. The Department will suspend collection if the debt is subject to a bankruptcy stay or if other reasons justify suspension.
- The Department also collaborates with the following agencies to offset the following past-due debts:
- Nebraska Department of Health and Human Services for child/spousal support payments;
- Internal Revenue Service for federal tax liabilities; and
- Nebraska Department of Labor for the repayment of unemployment insurance benefits.
These agencies provide balance due information to the Department. The Department maintains information about the delinquent debt in our database and continues to offset eligible individual income tax refunds until the corresponding agency suspends or terminates debt collection or offset activity for the debt. The Department transmits any amounts collected through offset to the appropriate agencies. Any questions concerning these past-due obligations should be directed to the corresponding agency.
Taxpayers with questions concerning a Nebraska individual income refund offset should contact the Department of Revenue at 800-742-7474 or at 402-471-5729.
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