Frequently Asked Questions from States as Debtors
The questions on this web page are about states in their capacity as debtors that owe overdue debts to the United States. For questions about how states can work with the Treasury Offset Program (TOP) to collect debts that people and businesses owe to them, see State Programs. To understand more about TOP, see How TOP Works.
General questions about debts states owe to the federal government
Examples of debts states might owe the federal government include, but are not limited to, disallowed grants, loans, and overpayments on projects.
In most cases, federal agencies can send a valid and legally enforceable debt to the Treasury Offset Program if the debt is more than 60 days overdue. This includes debts owed by states to the United States.
Before referring the debt to the Treasury Offset Program, the federal agency that is owed the debt or that is servicing the debt must send a letter (a "due process notice") to the last address on record for the debtor. The letter must explain the debtor's rights and opportunities to resolve or dispute the debt.
The state should pay the debt before the due date specified in the due process notice. If the state has questions or concerns about the debt, the state should work with federal agency that is owed or is servicing the debt.
The state may be able to work out an appropriate payment plan with that agency. The Treasury Offset Program (TOP) staff cannot arrange payment plans for debtors or resolve disputes about the amount owed.
TOP can, however, tell you how to reach the agency who can talk to you about it.
If you need information about whom to contact, call the TOP Interactive Voice Response System. (See the Contact Us page.)
When TOP offsets (i.e., intercepts) a payment, it sends a letter to the debtor/payee. Because the part of the state that owed the debt may be different from the part of the state that is owed the payment, the state may need to conduct internal coordination between those two parts.
To help this coordination, TOP can provide monthly reports to state comptrollers to help identify delinquent non-tax debts that the state owes to the federal government. These monthly reports include information about whom to contact in the relevant federal agency for each debt.
If you are concerned about a debt owed by your state agency, contact your state comptroller's office for the monthly report. You can also get information on whom to contact about your state agency's debt from the TOP Interactive Voice Response system. (See the Contact Us page.)
TOP uses the taxpayer identification number (TIN) to know who owes the debt. You may have received the decreased payment if your state agency's TIN is the same as another agency in your state that owes a debt. Coordinate with the other state agency to work out this issue.
You must talk with the federal agency that told TOP about the debt. That agency is responsible for returning any part of your payment that should not have been taken from you. To find out whom to contact, look at the notice your received about the debt or get the contact information from the TOP Interactive Voice Response system. (See the Contact Us page.)
The Internal Revenue Code prohibits Fiscal Service from disclosing that a tax-related debt exists. To find out about tax-related debts, you may contact the IRS: 800-829-1040.
Some federal payments, especially for large amounts, are sent by a service called Fedwire. Fedwire is often used when the payment must be received right away.
If the state has a debt in the TOP database, TOP blocks the Fedwire payment, and requires that the payment be issued through alternative payment mechanisms. This is to ensure that the payment can be offset to collect any debts in TOP.
The payment agency must pay through the automated clearing house (ACH). TOP offsets ACH payments. The payee/debtor gets whatever funds are left, if any, over after the overdue debt is satisfied.
Alternatively, the payment agency can request that the debtor contact the creditor agency to pay or otherwise resolve the debt. Once the debt is paid, the creditor agency will remove the debt from TOP, which will then remove the Fedwire block one (1) business day after the debt is removed from TOP.