26 USC 6402 - Authority to make credits or refunds

U.S Code last checked for updates: Feb 16, 2025

§ 6402.

Authority to make credits or refunds

(a)

General rule

(b)

Credits against estimated tax

(c)

Offset of past-due support against overpayments

(d)

Collection of debts owed to Federal agencies

(1)

In general

Upon receiving notice from any Federal agency that a named person owes a past-due legally enforceable debt (other than past-due support subject to the provisions of subsection (c)) to such agency, the Secretary shall—

(A)

reduce the amount of any overpayment payable to such person by the amount of such debt;

(B)

pay the amount by which such overpayment is reduced under subparagraph (A) to such agency; and

(C)

notify the person making such overpayment that such overpayment has been reduced by an amount necessary to satisfy such debt.

(2)

Priorities for offset

(3)

Treatment of OASDI overpayments

(A)

Requirements

(B)

Notice; protection of other persons filing joint return

(i)

Notice

In the case of a debt consisting of an OASDI overpayment, if the Secretary determines upon receipt of the notice referred to in paragraph (1) that the refund from which the reduction described in paragraph (1)(A) would be made is based upon a joint return, the Secretary shall—

(I)

notify each taxpayer filing such joint return that the reduction is being made from a refund based upon such return, and

(II)

include in such notification a description of the procedures to be followed, in the case of a joint return, to protect the share of the refund which may be payable to another person.

(ii)

Adjustments based on protections given to other taxpayers on joint return

(C)

Deposit of amount of reduction into appropriate trust fund

(D)

OASDI overpayment

(e)

Collection of past-due, legally enforceable State income tax obligations

(1)

In general

Upon receiving notice from any State that a named person owes a past-due, legally enforceable State income tax obligation to such State, the Secretary shall, under such conditions as may be prescribed by the Secretary—

(A)

reduce the amount of any overpayment payable to such person by the amount of such State income tax obligation;

(B)

pay the amount by which such overpayment is reduced under subparagraph (A) to such State and notify such State of such person’s name, taxpayer identification number, address, and the amount collected; and

(C)

notify the person making such overpayment that the overpayment has been reduced by an amount necessary to satisfy a past-due, legally enforceable State income tax obligation.

If an offset is made pursuant to a joint return, the notice under subparagraph (B) shall include the names, taxpayer identification numbers, and addresses of each person filing such return.

(2)

Offset permitted only against residents of State seeking offset

(3)

Priorities for offset

Any overpayment by a person shall be reduced pursuant to this subsection—

(A)

after such overpayment is reduced pursuant to—

(i)

subsection (a) with respect to any liability for any internal revenue tax on the part of the person who made the overpayment;

(ii)

subsection (c) with respect to past-due support; and

(iii)

subsection (d) with respect to any past-due, legally enforceable debt owed to a Federal agency; and

(B)

before such overpayment is credited to the future liability for any Federal internal revenue tax of such person pursuant to subsection (b).

If the Secretary receives notice from one or more agencies of the State of more than one debt subject to paragraph (1) or subsection (f) that is owed by such person to such an agency, any overpayment by such person shall be applied against such debts in the order in which such debts accrued.

(4)

Notice; consideration of evidence

No State may take action under this subsection until such State—

(A)

notifies by certified mail with return receipt the person owing the past-due State income tax liability that the State proposes to take action pursuant to this section;

(B)

gives such person at least 60 days to present evidence that all or part of such liability is not past-due or not legally enforceable;

(C)

considers any evidence presented by such person and determines that an amount of such debt is past-due and legally enforceable; and

(D)

satisfies such other conditions as the Secretary may prescribe to ensure that the determination made under subparagraph (C) is valid and that the State has made reasonable efforts to obtain payment of such State income tax obligation.

(5)

Past-due, legally enforceable State income tax obligation

For purposes of this subsection, the term “past-due, legally enforceable State income tax obligation” means a debt—

(A)

(i)

which resulted from—

(I)

a judgment rendered by a court of competent jurisdiction which has determined an amount of State income tax to be due; or

(II)

a determination after an administrative hearing which has determined an amount of State income tax to be due; and

(ii)

which is no longer subject to judicial review; or

(B)

which resulted from a State income tax which has been assessed but not collected, the time for redetermination of which has expired, and which has not been delinquent for more than 10 years.

For purposes of this paragraph, the term “State income tax” includes any local income tax administered by the chief tax administration agency of the State.

(6)

Regulations

(7)

Erroneous payment to State

(f)

Collection of unemployment compensation debts

(1)

In general

Upon receiving notice from any State that a named person owes a covered unemployment compensation debt to such State, the Secretary shall, under such conditions as may be prescribed by the Secretary—

(A)

reduce the amount of any overpayment payable to such person by the amount of such covered unemployment compensation debt;

(B)

(C)

notify the person making such overpayment that the overpayment has been reduced by an amount necessary to satisfy a covered unemployment compensation debt.

If an offset is made pursuant to a joint return, the notice under subparagraph (C) shall include information related to the rights of a spouse of a person subject to such an offset.

(2)

Priorities for offset

Any overpayment by a person shall be reduced pursuant to this subsection—

(A)

after such overpayment is reduced pursuant to—

(i)

subsection (a) with respect to any liability for any internal revenue tax on the part of the person who made the overpayment;

(ii)

subsection (c) with respect to past-due support; and

(iii)

subsection (d) with respect to any past-due, legally enforceable debt owed to a Federal agency; and

(B)

before such overpayment is credited to the future liability for any Federal internal revenue tax of such person pursuant to subsection (b).

If the Secretary receives notice from a State or States of more than one debt subject to paragraph (1) or subsection (e) that is owed by a person to such State or States, any overpayment by such person shall be applied against such debts in the order in which such debts accrued.

(3)

Notice; consideration of evidence

No State may take action under this subsection until such State—

(A)

notifies the person owing the covered unemployment compensation debt that the State proposes to take action pursuant to this section;

(B)

provides such person at least 60 days to present evidence that all or part of such liability is not legally enforceable or is not a covered unemployment compensation debt;

(C)

considers any evidence presented by such person and determines that an amount of such debt is legally enforceable and is a covered unemployment compensation debt; and

(D)

(4)

Covered unemployment compensation debt

For purposes of this subsection, the term “covered unemployment compensation debt” means—

(A)

a past-due debt for erroneous payment of unemployment compensation due to fraud or the person’s failure to report earnings which has become final under the law of a State certified by the Secretary of Labor pursuant to section 3304 and which remains uncollected;

(B)

contributions due to the unemployment fund of a State for which the State has determined the person to be liable and which remain uncollected; and

(C)

any penalties and interest assessed on such debt.

(5)

Regulations

(A)

In general

(B)

Fee payable to Secretary

(C)

Submission of notices through Secretary of Labor

(6)

Erroneous payment to State

(g)

Review of reductions

(h)

Federal agency

(i)

Treatment of payments to States

(j)

Cross reference

(k)

Refunds to certain fiduciaries of insolvent members of affiliated groups

(l)

Explanation of reason for refund disallowance

(m)

Earliest date for certain refunds

(n)

Misdirected direct deposit refund

Not later than the date which is 6 months after the date of the enactment of the Taxpayer First Act, the Secretary shall prescribe regulations to establish procedures to allow for—

(1)

taxpayers to report instances in which a refund made by the Secretary by electronic funds transfer was not transferred to the account of the taxpayer;

(2)

coordination with financial institutions for the purpose of—

(A)

identifying the accounts to which transfers described in paragraph (1) were made; and

(B)

recovery of the amounts so transferred; and

(3)

the refund to be delivered to the correct account of the taxpayer.

(Aug. 6, 1954, ch. 736, 68A Stat. 791; Pub. L. 94–455, title XIX, § 1906(b)(13) (A), (K), Oct. 4, 1976, 90 Stat. 1834, 1835; Pub. L. 97–35, title XXIII, § 2331(c), Aug. 13, 1981, 95 Stat. 861; Pub. L. 98–369, div. B, title VI, § 2653(b)(1), (2), July 18, 1984, 98 Stat. 1154, 1155; Pub. L. 98–378, § 21(e), Aug. 16, 1984, 98 Stat. 1325; Pub. L. 100–647, title VI, § 6276, Nov. 10, 1988, 102 Stat. 3753; Pub. L. 101–508, title V, § 5129(c), Nov. 5, 1990, 104 Stat. 1388–288; Pub. L. 103–296, title I, § 108(h)(7), Aug. 15, 1994, 108 Stat. 1487; Pub. L. 104–134, title III, § 31001(u)(2), Apr. 26, 1996, 110 Stat. 1321–375; Pub. L. 104–193, title I, § 110(l)(7), Aug. 22, 1996, 110 Stat. 2173; Pub. L. 105–33, title V, § 5514(a)(1), Aug. 5, 1997, 111 Stat. 620; Pub. L. 105–206, title III, §§ 3505(a), 3711(a), (c), July 22, 1998, 112 Stat. 771, 779, 781; Pub. L. 109–171, title VII, § 7301(d), Feb. 8, 2006, 120 Stat. 144; Pub. L. 110–328, § 3(a), (d), Sept. 30, 2008, 122 Stat. 3570, 3573; Pub. L. 111–291, title VIII, § 801(a), Dec. 8, 2010, 124 Stat. 3157; Pub. L. 111–312, title V, § 503(a), Dec. 17, 2010, 124 Stat. 3308; Pub. L. 114–113, div. Q, title II, § 201(b), Dec. 18, 2015, 129 Stat. 3076; Pub. L. 115–141, div. U, title IV, § 401(a)(285)–(287), Mar. 23, 2018, 132 Stat. 1198; Pub. L. 116–25, title I, § 1407, July 1, 2019, 133 Stat. 1001; Pub. L. 118–258, title II, § 202(a)(2)(F), Jan. 4, 2025, 138 Stat. 2972.)

cite as: 26 USC 6402

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