1.36.4. Administrative (Non-tax) Debt Management

(1) The Debt Collection Act of 1982 and the Debt Collection Improvement Act of 1996 were enacted to:

• Increase efficiency of governmentwide efforts to collect debts owed to the United States.

• Maximize collections of delinquent debt.

• Minimize costs and reduce loss arising from debt management.

• Ensure the public is fully informed of the federal government’s debt collection policies.

• Ensure debtors have all appropriate due process rights.

(2) This IRM contains provisions pertaining to non-tax debts owed to the United States government by individuals and entities such as businesses, trade associations and non-profit organizations. These provisions derive their authority from Chapter 37 of Title 31 United States Code (USC) and from Title 31 Parts 5 and 900-904, of the Code of Federal Regulations (CFR). This IRM also contains provisions specifically pertaining to non-tax debts owed to the United States government by federal civilian employees, former federal civilian employees and the estates of former federal employees. These provisions derive their authority from Title 5 of the USC and from Title 5 of the CFR.

(3) 31 USC Section 3711, Collection and compromise, requires a federal agency try to collect claims of or debts owed to the United States government for money or property arising out of the activities of, or referred to, the agency.

(1) The authorities for this IRM include:

1. Debt Collection Act of 1982

2. Deficit Reduction Act of 1984, Pub L. 09-369

3. Debt Collection Improvement Act of 1996

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

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

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

7. 5 USC Section 4108, Employee agreements: service after training

8. 5 USC Section 5514, Installment deduction for indebtedness to the United States

9. 5 USC Section 5584, Claims for overpayment of pay and allowances and of travel, transportation and relocation expenses and allowances

10. 5 USC Section 8906, Contributions

11. 11 USC Section 523(a)(8), Exceptions to discharge

12. 31 USC Section 3701, Definitions; 31 USC Section 3711, Collection and compromise (collectively the Federal Claims Collection Act of 1966, as amended)

13. 31 USC Sections 3711 - 3720E, Claims of the United States Government

14. 31 USC 3717, Interest and penalty on claims

15. 5 CFR 550.1104, Agency regulations (Collection of Debt by Salary Offset)

16. 5 CFR Section 630.209, Refund for Unearned Leave

17. 5 CFR Section 890.502, Withholding, contributions, LWOP, premiums and direct premium payment

18. 31 CFR Part 285, Debt Collection Authorities Under the Debt Collection Improvement Act of 1996

19. 31 CFR Section 5.12, How will Treasury entities offset a Federal employee's salary to collect a Treasury debt?

20. 31 CFR Parts 900-904, Federal Claims Collection Standards

21. 41 CFR Chapter 300, Federal Travel Regulation

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

23. Treasury Directive Publication (TD P 34-01), Waiving Claims Against Treasury Employees for Erroneous Payments

24. Treasury Directive Publication (TD P 34-02), Credit Management and Debt Collection

(1) This section provides responsibilities for:

1. CFO and Deputy CFO

2. Senior Associate CFO for Financial Management and Associate CFO for Corporate Accounting

3. Travel Management

4. Travel Operations

5. Travel Review

6. Government Payables and Funds Management

7. Intragovernmental and Funds Processing

8. Human Capital Office

9. Human Resources Shared Services

10. Labor/Employee Relations and Negotiations (LERN)

11. Associate Chief Counsel (Finance and Management)

12. Associate Chief Counsel (General Legal Services)

13. Human Resources Division, Chief Counsel

14. Payroll and Processing Branch, Chief Counsel

15. Managers/supervisors

16. Employees and former employees

(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 and Funds Management uses monthly reports to monitor the status of aging and delinquent debts submitted for collections.

6. The Treasury Report on Receivables 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 and Funds Management office measures effectiveness of the program by ensuring the referral of employee delinquent non-tax debts for enforced collection to the National Finance Center 30 calendar days after final due process or after 60 calendar days delinquent and former employee or entity delinquent non-tax debts to Fiscal Service before the debt is delinquent 120 calendar 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 calendar days.

(1) Program controls for non-tax debts owed to the United States include:

(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 a non-tax debt or claim.

2. Administrative debt - A non-tax debt owed to the federal government that occurs because of administrative actions. (e.g., salary and benefit overpayments, unpaid fines and penalties, travel overpayments). Also referred to as administrative non-tax debt or non-tax debt.

3. Administrative Fee - Additional costs incurred in processing and handling a debt because it has become delinquent.

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

5. Appeal - An administrative proceeding in which the debtor requests a higher management official review of the determination that they owe all or part of the debt.

6. 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.

7. 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.

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

9. 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.

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

11. 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, a former employee or an entity.

12. 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.

13. Default - Failure to meet a financial obligation.

14. 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.

15. 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.

16. Due process - The requirement to give the debtor notice of a non-tax debt and the opportunity to dispute the debt and intended collection action.

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

18. 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.

19. 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 or due to a correction made to the FEHB.

20. Hearing Official - An Administrative Law Judge or other individual authorized to conduct a hearing and issue a final decision in response to a request for a hearing.

21. 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.

22. Just financial obligation - Any financial obligation acknowledged by the employee or reduced to judgment by a court.

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

24. Overpayment - Any amount paid that is more than the amount owed to the employee and to which they are not entitled.

25. 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.

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

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

28. Proof of Debt - Document(s) of which a creditor submits details of its claim.

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

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

31. Restitution - Compensation to the United States for a loss, damage or injury.

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

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

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

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

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

37. Waiver request - A petition seeking relief from paying a non-tax debt.

(1) The following acronyms apply to this program:

(1) Related resources for this IRM include:

1. IRM 1.32.1, IRS Local Travel Guide

2. IRM 1.32.4, Government Travel Card Program

3. IRM 1.32.11, IRS City-to-City Travel Guide

4. IRM 1.32.12, IRS Relocation Travel Guide

5. IRM 1.32.13, Relocation Services Program

6. IRM 1.35.13, Administrative Waiver

7. IRM 6.550.1, Pay Administration (General)

8. IRM 6.610, Hours of Duty

9. IRM 6.630, Absence and Leave

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

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

12. Federal Employees Health Benefits (FEHB) Program Handbook

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

14. IRS Employee Resource Center website

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

(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.

1. An ESP is collected from the employee’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.

(1) Advanced leave is subject to repayment. SeeIRM 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.

(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 FEHB payments 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 1.36.4.2.4 for FEHB premiums information.

(3) Employees have a responsibility to notify the IRS of errors and may be required to repay salary overpayments, including those caused by the IRS.

(4) The IRS notifies the employee 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 collect the full amount from the employee’s next salary payment and a notice will be placed on the Statement of Earnings and Leave for the collection. If the employee is in a non-pay status, normal debt collection procedures will apply and they will be provided with notice of the debt.

(6) An employee who receives an erroneous salary overpayment may request a waiver of repayment. See IRM 1.35.13, 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.

(1) The 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 their salary each pay period. An employee may incur a debt when they cannot pay their 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) Federal employees in a non-pay status or who receive salary that is insufficient to pay their share of the FEHB premium 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 USC Section 8906(e). If advanced pay is necessary to cover the employee’s share of their FEHB premium, the employee or former employee (if the employee does not return to pay status) is obligated to repay the IRS.

(3) If the employee elects to continue coverage while in a leave without pay status but not to pay their health insurance premiums on a current basis, the employee is indebted to the IRS for all payments made on their behalf. Collection on the debt is made per 5 CFR Section 890.502, Withholding, contributions, LWOP, premiums and direct premium payment, when the employee returns to pay status.

(4) An employee’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 (OPM) website.

(1) An employee receiving the Student Loan Repayment Program benefit must sign a service agreement that commits the employee to continue employment with the IRS for a period of at least 3 years beginning on the effective date of the service agreement.

(2) Benefits received beyond the initial service agreement will automatically extend the service agreement for one year for each annual payment made.

(3) An employee must reimburse the IRS for all benefits received if separated either voluntarily or involuntarily (for misconduct, unacceptable performance or a negative suitability determination) prior to the end of the service agreement.

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

(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, IRS Relocation Travel Guide and IRM 1.32.13, Relocation Services Program for additional information.

4. Withholding Tax Allowance is calculated and applied to the employee's relocation voucher and third-party payments made on the employee's behalf. When the employee’s taxable income is below the Withholding Tax Allowance, the IRS determines the amount the employee must reimburse the IRS for the overpayment.

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

(1) An employee 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 or former 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, 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.”

(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, former employee, individual or entity 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 debtor 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.

(1) Debts arising from vendor transactions include but are not limited to:

1. IRS Grant Programs - If a recipient of funds from an IRS grant program does not comply with the federal requirements, terms and conditions of the program, the funds must be paid back to the IRS.

2. User Fee Programs - Participants that receive benefits or services for a fee must pay all invoices in full by the due date. See IRM 1.33.7, User Fees, for additional information.

3. Contracted Goods and Services - Any payment made to a vendor for goods or service to be provided to the IRS must be repaid to the IRS if the terms and conditions of the contract are not fulfilled. See IRM 1.35.3, Receipt and Acceptance Guidelines, for additional information.

(2) Delinquent debts are referred to Fiscal Service for collection through their Debt Management Services and are collected through various means such as:

1. Administrative Wage Garnishment.

2. Credit Bureau Reporting.

3. Treasury Offset Program (TOP).

4. Referral to Private Collection Agencies.

(3) Delinquent debtors are generally barred from receiving federal loans or loan guarantees until the debt is resolved.

(1) The IRS assesses interest on a debt at the Current Value of Funds Rate in effect at the time the debt becomes delinquent 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.

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

(1) The penalty rate the IRS assesses is set by law, 31 USC 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.

(1) The IRS may waive in whole or in part the interest, administrative charges and penalties in accordance with 31 Section CFR 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.

(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, the collected amount is applied 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.