Debts

Delinquent debt is defined to mean:

(i) a single account or monetary obligation which is at least $50 owed by a debtor to a local government; or,

(ii) a group of accounts or single monetary obligations, each of which is less than $50, that have been combined to total at least $50, owed by the same debtor to a local government; or,

(iii) a combination of two or more accounts or monetary obligations, one of which is at least $50 and the remainder of which when added together equal less than $50, owed by the same debtor to a local government.

For example, a debtor owes $50 for one year's delinquent property tax, $45 for a utility debt and $25 for a parking ticket.  The local government would submit two separate debts for this debtor—1) the $50 property tax; 2) combined $70 (utility and parking ticket).

As another example, a debtor owes property taxes in the amount of $25 for an automobile and $20 for a vacant land parcel for 2 consecutive tax years ($40 total).   Both of these tax debts can be combined under the debtor’s social security number and submitted to the Clearinghouse.

In addition, the Clearinghouse requires that a period of 60 days must have elapsed between the time the local government declares all of the applicable accounts or monetary obligations delinquent and the date the delinquent debt is submitted to the Clearinghouse for collection.

Best Practices for submitting debts and combining debts:

• Debts over $50 MUST be submitted separately
• Tax debts should not be combined with any other type of debt
• Multiple tax debts under $50 can be combined into one debt
• Multiple non-tax debts under $50 can be combined into one debt
• Identify/notate combined debts in Account Number area

• Animal Violations
• Assessments
• Cemetery
• Daycare
• Demolitions
• Dental
• Employees
• Environmental Health
• False Alarms
• Fines (Library/other)
• EMS
• Health
• Housing Authority (must be a final judgement)
• Hydrant Usage
• Insurance Premiums
• Judgments
• Maintenance (Lawns/trees)
• Nuisance
• Ordinance Violations
• Parking Tickets
• Property Damage
• Privilege License (delinquent prior to June 30, 2015)
• Recreation
• Rental/lease agreements
• Returned Checks
• Room Occupancy
• Sewer Tap
• Solid Waste
• Storm water
• Tax-Property
• Tax-Vehicle
• Utilities

No, any debt to a local government is valid.

The Clearinghouse requires a debt to be sixty (60) days delinquent before the required notification letter be sent to the debtor's last known address by regular mail. This letter gives the debtor thirty (30) days to request a hearing.

Yes, but the Compliance Date must be a date AFTER the 30 day period. The Clearinghouse does not send the debt to the NC Department of Revenue until the Compliance Date has passed.

No, the Clearinghouse does not modify and/or combine different debts. All debts less than $50 will not be submitted to the Department of Revenue or Education Lottery.

Any debts under the same SSN can be combined among even different types of debtsto meet the $50 minimum. If all debts are in excess of $50, they must be submitted individually.

No, we DO NOT recommend combining tax debts with any other type of debts. Tax debts can be combined to get to the $50 minimum.

Then your local government may be missing out on collections and should demand the vendor combine debts.

They are in violation of the procedures set by the NC Local Government Debt Setoff Clearinghouse and are not recovering the proper fee amounts to support the program.

The Clearinghouse will add the $15 fee to each debt over $50. The local government can ONLY submit the actual delinquent debt amount.  The local government is required to notify the debtor of the $15 fee in the notification letter.

All debts successfully setoff, whether collected in full or in part, will incur the $15 fee, unless the amount returned from the NC Department of Revenue is less than $50.  If the same debtor has multiple debts in excess of $50, each debt will incur the $15 fee.  If the local agency combined debts under the same SSN to meet the $50 minimum, only one $15 fee will be assessed. Only ONE $15 Clearinghouse fee is taken per debt per calendar year.

No, by law local governments cannot add any additional fees for the setoff debt collection. The only possibility is if when the debtor signed up for service and signed a document that stated there would be a collection fee added.

Yes, the North Carolina Department of Revenue is legislated to add a $5.00 fee to the tax refund amount that is setoff.  If a debtor files multiple tax returns in the same year and has at least one debt over $50, then a $5.00 fee is charged for each tax return processed by the Department of Revenue.

There are often situations where a debtor's tax return is setoff and they have education lottery winnings that are also taken. The Clearinghouse will apply only one $15 fee per debt per calendar year. However, the NC Department of Revenue and Education Lottery are allowed to take their legislated $5 fees. Often this multiple setoff scenario results in a surplus which is deposited into the local government Capital Management account and is to be refunded to the debtor. A separate surplus excel file is provided that includes the address from the NC Department of Revenue.

The local government must return all setoff money, including the local collection assistance fee of $15 (if taken) and the $5 Department of Revenue’s and/or Education Lottery's collection assistance fee.  Keep good documentation to show how error occurred.

The local government must return all setoff money, including the local collection assistance fee of $15 (if taken) and the $5 Department of Revenue’s and/or Education Lottery's collection assistance fee.  Keep good documentation to show how the error occurred. If the Department of Revenue and/or Education Lottery setoff the SSN or ITIN that was submitted by the local government, then the local government is required to return all funds and fees to the debtor.

No, but you should keep good documentation of notices sent.  Keep any returned mail as required by state retention laws.  We suggest you keep a copy of the electronic file that created the letters as proof.  This will show you made reasonable efforts to contact the debtor.  A large percentage of letters sent will be returned. However, not only will debtors who had their letter returned due to a bad address object and even appeal, but many who receive the letter will deny that they did.  

No. There has been legislation presented for IRS setoffs but nothing at this time.

Do not send the individuals to the Clearinghouse.

Modify the debt amounts to $.00 and send an update to the Clearinghouse.

The tax preparation company filing on behalf of the debtor must deal with the debtor directly for loan repayment.

None, the town/county could review the case and delete it from the process if a valid error has been made.

Yes, each person entering data  may be assigned a Username and password by the Local Coordinator. However, there will be only one identification number (Entity Code) per local government.  The Username and password code will also help you identify who keyed certain items by viewing the History log.

No, only one contract per local government entity.

File under one name and SSN, and it usually would be the husband. 

As long as the remaining debt balance is over $50 it will be sent each Tuesday to the Department of Revenue. The Department of Revenue then forwards on to the Education Lottery.