The Treasury Offset Program (TOP) is the most powerful instrument that utilizes means to recover overdue payments from individuals, businesses, and even state agencies. TOP is administered by the Bureau of the Fiscal Service, U.S. Department of the Treasury. It ensures repaying the delinquent debt amounts by withholding money from federal payments due to go to the debtor.
How TOP works
TOP does just that: it marries people or entities owing money to payments they are due to get from federal entities. If such a match occurs, a portion or the entire payment will be withheld or offset for a particular debt.
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For example, a child who has not received child support for an extended period or who defaulted on a federal loan will have their federal tax refund or Social Security taken away to pay the back amount. TOP raised $3.8 billion in bad debt collections for the year 2024 for both the federal and state levels.
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None of the debt was sent to TOP
The agencies must notify the debtors 60 days before sending them to TOP. The notice mentioned above will include:
- Debt type and amount
- Notice of intent to send that debt to TOP by the Agency
- Rights of the debtor concerning payment options and disputes or entering into a payment plan.
- Debtors thus get a chance to clear their debts before they undergo federal offset.
The offset process
An agency is to refer a debt to the TopTwelve months in order of days when it is determined thirty days after the date of delinquency that it is valid and legally enforceable. A referral must include information identifying the debtor, inclusive of SSN (Social Security number) or EIN (employer identification number).
The payment request from a federal agency, such as a tax refund or vendor payment, contains identifying information on the recipient. TOP is then checked before any payment is disbursed to ascertain whether the recipient owes any debts.
If the amount owing matches a qualifying payment for offset, it shall be deducted from the payment amount. Any remaining balance shall be paid to the payee.
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Notifications and disbursement
In cases where a payment is offset, the TOP sends a letter to the debtor containing a brief explanation regarding the lesser-than-expected, or outright withholding, amount. Subsequently, the amount withheld is transferred to the assisting agency that is owed the debt.
Staying with or departing from the TOP database
A debtor remains in the TOP system until the referring agency requests removal. When a) the debt is repaid totally, b) the debtor files for bankruptcy, or c) other valid reasons arise for termination or suspension of collection.
Legal authority behind TOP
TOP has its legal basis established by various federal laws:
- 26 U.S.C. § 6402(d)
- 31 U.S.C. § 3716(c)
- 31 U.S.C. § 3720A
These statutes create a legal framework for when and how the federal payments are offset.
