News Releases

Federal Tax Refund Offset Program a Success for the State

March 16, 2004

BATON ROUGE — A tax collection program whereby a taxpayer’s federal individual income tax refund is garnished to satisfy a state individual income tax delinquency has collected approximately $50 million over 18 months, according to Revenue Secretary Cynthia Bridges.

“It’s one of the most successful enforcement tools we have,” Bridges points out. The program was fully implemented last year after a pilot program that involved about 10,000 taxpayers. “Before Congress passed the enabling legislation, the Internal Revenue Service (IRS) could garnish a state tax refund to satisfy a federal income tax liability, but the state could not garnish a federal refund to satisfy a state income tax liability. Since it’s implementation, the program has been a huge success for the state.”

Bridges says the program works in the following way: When a state individual income tax delinquency reaches the final assessment stage, the taxpayer is notified of the impending federal garnishment and given 60 days to bring the account up to date. If the tax liability is not satisfied by the end of that period, the taxpayer’s name and the amount he owes are reported to the federal Financial Management Services (FMS) agency, a clearinghouse for all government garnishments. The FMS notifies the IRS about the liability and the taxpayer’s federal refund is garnished and sent to the FMS. The FMS then forwards the garnished amount to the state.

The first 60-day notifications were sent out to delinquent taxpayers in November 2002 and resulted in the collection of more than $8 million before any IRS garnishments were implemented. An additional $15 million was collected through IRS garnishments by the end of June 2003. From July 1, 2003 through February 26, 2004, $4.8 million was collected after 60-day notices were sent to taxpayers, and another $22 million has been collected through IRS garnishments.

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Byron Henderson
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