Set-off or offset programs divert a taxpayer’s refunds and government payments to pay federal or state debts such as unpaid taxes, traffic fines, or child support. The Division of Taxation participates in several set-off programs that collect funds for the State of New Jersey as well as other government entities.
These programs include:
Set-Off of Individual Liability (SOIL)
SOIL withholds New Jersey Income Tax refunds and Homestead Benefit payments from taxpayers who owe debts to other agencies such as the:
If an agency claims you have a debt, and a tax refund or benefit payment is available, you will receive a notice. The notice will tell you:
If the agency tells us the debt still exists, all or part of your refund or benefit payment may be used to pay the debt. We cannot release your refund unless that agency notifies us that the debt is paid.
If the debt was recently settled, the agency will notify us to release the refund or benefit.
If you have no debts with other agencies, the refund or benefit will be released and sent to you.Please note: If all or part of your refund or benefit payment is released, it may take up to 60 days from the date of the notice to receive your payment.
Federal Offset of Individual Liability (FOIL)
This program withholds federal income tax refunds and monthly federal pension payments.
Federal Income Tax Refund Setoff:
FOIL withholds federal income tax refunds and diverts them to reduce unpaid New Jersey Income Tax debts.
If you do not respond to a FOIL bill within 90 days, we send a Notice of Intended Federal Set-Off.
This notice informs you that you have 60 days to clear up your debt.
If you do not resolve your tax issues within the allotted period, the Division contacts the federal Bureau of the Fiscal Service (BFS). BFS sends your federal tax refund(s) to the New Jersey Division of Taxation.
The federal government charges a $21.84 processing fee per transaction that is deducted from the refund.
FOIL withholds monthly federal pension payments, up to 25% of total payment amount, and diverts them to reduce unpaid New Jersey Income Tax debts.
The Bureau of the Fiscal Service (BFS) issues a notice that you have two months to clear up your debt.
If you do not resolve your tax issues within the allotted period, BFS sends your monthly federal pension payment withheld to the New Jersey Division of Taxation. BFS withholds your monthly pension payment each month and sends withheld funds to the New Jersey Division of Taxation until your debt is paid.
The federal government charges a $21.84 processing fee per transaction that is deducted from the payment.
State Vendor Set-Off
The New Jersey Office of Management and Budget (OMB) withholds payments to vendors that owe taxes to the State. The payments are sent to the Division of Taxation to reduce the vendor’s State tax debt.
If you or your business do work with New Jersey, your payments can be diverted to resolve your tax debt. We will notify you and your caseworker after we receive the funds. The Division processes full or partial refunds directly to the vendor if diverted payments exceed the vendor’s tax debt.
Federal Treasury Offset Program (TOP)
The Treasury Offset Program (TOP) is based on an agreement between New Jersey and the federal Bureau of the Fiscal Service (BFS). BFS and New Jersey match debts (both tax and non-tax) against payments due to vendors.
If you do not respond to a bill sent under this program within 90 days, we send you a Notice of Intended Federal Set-Off.
This notice informs you that you have 60 days to clear up your debt or your payment(s) will be diverted to reduce the debt.
The federal government imposes a $12.50 processing fee per transaction. The federal government deducts the fee from the payment amount.
State Reciprocal Set-Off
Maryland, New York, and Connecticut participate in an agreement to send individual income tax refunds to New Jersey to resolve tax debts. In turn, we send New Jersey Income Tax refunds to offset taxes owed in other states.