What is a debtor?
A debtor is any individual having a delinquent debt or account with any claimant agency which has not been adjusted, satisfied or set aside by court order, or discharged in bankruptcy.
(Setoff Debt Collection Act, S.C. Code Section 12-56-20
What constitutes a delinquent debt?
A delinquent debt is any sum due and owed any claimant agency. It includes the collection costs, court costs, fines, penalties and interest which have accrued through contract, subrogation, tort, operation of law, or any other legal theory regardless of whether there is an outstanding judgment for the sum which is legally collectible and for which a collection effort has been or is being made. (Setoff Debt Collection Act, S.C. Code Section 12-56-20)
Examples: delinquent property taxes, rent, utility bills, parking fines, tuition fees, garbage fees, property damage costs, etc.
Can the Municipal Association and a participant collect a reasonable fee through setoff in addition to the original debt amount?
Yes. The Municipal Association charges a $25 administrative fee. Participants may charge an administrative fee up to $25. The Setoff Debt application will add these fees to the original debt amount.
Can other means of collection, such as a collection agency, be used while the debt is pending setoff?
Yes. You may use other means of collection, such as a private collection agency, after submitting the debt to the Department of Revenue. If the debt is collected by other means, the participant must immediately post the payment in the system. The Association will notify the Department of Revenue. If the debt is setoff by the Department of Revenue in the interim, the participant must refund the setoff, including the DOR fee to the taxpayer.
How long will the list of claims be current?
The list is current for one tax year. The Department of Revenue will match the list of claims submitted by the Association on behalf of participants against the refunds due for that tax year. You may delete a claim or reduce the amount owed. You cannot add new claims or increase debt amounts after the initial list of debtors is forwarded to DOR. Each December, the Association submits a new list of debtors to DOR.
What happens if a debtor files bankruptcy?
If you receive notice
that a debtor is in bankruptcy and the debt is dismissed, it cannot be setoff.
Should I accept payments after January 1?
Yes, the debtor's state refund may not cover the entire debt amount. Instruct the debtor to wait four to six weeks before filing his income tax return. This will lessen the chance of the debt being offset before the payment is recognized. Some participants have a written disclaimer that states the debtor has been informed to wait four to six weeks before filing his tax return. If he files before that time, the participant will not refund any fees incurred from a setoff. Have the debtor date and sign the disclaimer.
What do I do if a debtor is owed a refund?
If a debtor is owed a refund because his refund was setoff in error, do not wait until receiving a disbursement check from the Association to issue the refund. Based on legal advice, the Association recommends issuing the refund immediately.
Is there a limit to the dollar amount of past due debts that should be submitted?
Bills with an original debt of less than $50 may be entered into the system and initial letters may be printed for claims with a total current debt less than $50. However, the Association does not submit claims with a current debt less than $50 to the Department of Revenue.
Can I submit debts regardless of how old they are?
No. The delinquent date for new bills must be within the past three calendar years. An unsatisfied claim rolled over from a prior tax year with all bills having delinquent dates older than three years are not submitted to the Department of Revenue unless a payment or setoff has occurred within the past three calendar years.
What happens if the entire debt amount is not collected?
Before each new tax year, the Association performs new year processing, which automatically rolls over all unsatisfied claims and bills from the prior tax year to the new tax year. The participant may edit these bills as appropriate.
Can I set off a debt from a corporation?
Yes, if the corporation files an income tax return under an individual's Social Security number. The Department of Revenue's system is not designed to track taxpayer identification numbers normally associated with corporations.
Can I submit a debt if the debtors' spouse makes an injured spouse claim?
Yes, if a debtor files a joint return, the amount will be deducted from the total joint refund without regard to which spouse incurred the debt or actually withheld the taxes.
How often does the Association transmit payments and adjustments to the South Carolina Department of Revenue?
The Department of Revenue accepts payment and adjustment exports from the Association three times a week from January to mid-June and one time a week from mid-June to December.