Frequently Asked Questions

debtors - (updated July 8, 2015)

1. Do we need Social Security Numbers to submit debtors to the Clearinghouse?

Yes, Social Security Numbers (SSNs) are required. A debt setoff cannot occur at the Department of Revenue without an SSN to match against tax refunds. The Department of Revenue matches the SSN against the first four characters of the last name.

2. What about undocumented non-citizens who do not have Social Security Numbers?

These individuals may have an Individual Tax Identification Number (ITIN). They must provide this ITIN to their employers and use to file a tax refund. Local governments can use to submit debt against these individuals. We have setoff thousands of debtors using ITINs.

3. Can you submit debts for business owners?

We recommend that you only submit debts for individuals. However, if you do attempt to collect against a business you should ensure the business owner is the sole owner, Still, you must provide the Social Security Number (or Individual Tax Information Number), Last Name and at least the first letter of the First Name for the business owner.  A Federal Tax ID number will not suffice, an actual SSN or ITIN is required.

4. Didn't legislation pass that allows for the debt setoff program against businesses?

Yes, the law passed but the Department of Revenue has not yet implemented the setoff process for anything other than SSNs and ITINs. There are no plans at this time for the Department of Revenue to begin setoffs against business tax numbers. While initially promising, very few businesses actaully receive state tax refunds so the setoff possibilities will be slim anyway.

5.  When debtors pay you directly do you send the amount paid or the new balance?

You always send the new debt balance to the Clearinghouse. The Clearinghouse does not do any calculations, we simply replace the debt amount we have with the debt amount you send to the Clearinghouse. This is especially important if the debtor pays in full or it reduces the debt to less than $50. Once a debt is below $50 it is no longer included in the weekly file to the Department of Revenue.

6.  How are debtors notified that their tax refund has been setoff?

The debtor receives an official letter from the North Carolina Department of Revenue listing the amount that was setoff for indebtedness to a local government and the toll free number to call for information.

7.  If a debtor pays their debt(s) in full but still had their tax refund setoff, how much should be refunded?

If the debtor paid a debt but was still setoff at the Department of Revenue, they are due a refund of the amount surplus amount. Quite often there is a reason that it occurred. There is a timing issue in many instances. If someone pays your local government directly, it may take up to eight days before the debt is removed at the Department of Revenue. In other instances, the debtor received the letter from the Department of Revenue that they were setoff. The debtor may attempt to pay the debt hoping that they will also get the $15 Clearinghouse fee and the Department of Revenue or Education Lottery fee. We discourage refunding the Clearinghouse, Department of Revenue or Education Lottery fees. Remember, the debtor was notified that they had 30 days in order to pay the debt in full to keep from being submitted to the Department of Revenue. However, if a debtor paid your local government and you failed to send the updated balances to the Clearinghouse for a week or longer, you should consider returning the surplus and fees.

8.  What are some tips on submitting debtors?

• Provide the suffix, if available, in the Last Name, ex. Jr, Sr, III, IV, etc.
• Provide middle initial, if available
• Use only debtor name, do not use words such as Estate, Heirs, C/O, etc.
• For joint debtors:
1. if only have one SSN/ITIN: send one debt and put both names in First Name
2. if have both SSNS/ITINs: send separate debts for each debtor, split debt amount (if still over $50)

9. What kind of information is required for a debtor and their debt(s)?

There are several required items for each debtor:

• Social Security Number or Individual Tax Identification Number (ITIN) (no Federal or Tax ID numbers)
• First Name (at least first character)
• Last Name
• Compliance Date (date to begin attempting to collect, minimum 30 days after due process notification letter was sent)
• Expiration Date (date to terminate attempting to collect)
• Debt Amount (must be $50.00 or more)

10.  How do the Statutes of Limitations apply to debtors and their debts?

This topic is one of the most difficult in providing exact guidance. There are differing opinions. There are some local government attorneys that feel that the Statutes of Limitations do apply to state government but not to local governments. Before the Local Government Debt Setoff program was implemented, the NC Attorney General in 1996 stated an opinion that the Statutes do not apply to local government debts under the Debt Setoff program. Click here for the link to the ruling.

Some attorneys have opinions that if the debtor does not appeal, within 30 days after receiving the required notification letter, then debts will not expire. But if appealed within 30 days then the statute may apply and a local government can go 10 years back for taxes and 3 years back for any other type of debt. While other have the opinion based on a determination of a debt status "age of activity". If a debt is delinquent and an invoice/bill has been sent to a debtor within three years (non-tax) or ten years (taxes), then the debt is deemed active and can be submitted.

Both the NC Association of County Commissioners and the League of Municipalities advise you to consult your attorney and be sure they feel comfortable defending their opinion of the Expiration Dates being submitted by your local government. If it is determined that some or all of your existing debts can be extended, the Expiration Dates may need to be modified and re-submitted. Let us know if we can assist as we can easily modify these dates with our software. Don’t just assume you have to expire all debts after 3 years! If a bill/invoice has been sent, or a payment was received within 3 years (10 years for taxes) from the time you sent the debtor a letter, it may never need to expire. We have many local governments using expiration dates of 2020, 2050 and even 2099. We have collected thousands of debts older than three years.