Once you fall 180 days behind on a debt owed to a federal agency, federal non-tax debt collection shifts into a system with tools most private creditors will never have: the Department of the Treasury can seize your tax refund, garnish up to 15% of your wages, take a slice of your Social Security check, and damage your credit — all without a court order, and with no statute of limitations to run out on you. You still have real rights at every step, but they only help if you use them within tight deadlines.
What Counts as a Federal Non-Tax Debt
A federal non-tax debt is any money or property a federal official has determined you owe the United States, as long as the obligation did not arise under the Internal Revenue Code.1Office of the Law Revision Counsel. 31 USC 3701 – Definitions and Application The category sweeps in defaulted student loans funded or guaranteed by the Department of Education, Small Business Administration loans in default, overpayments of veterans’ disability or education benefits, and fines assessed by agencies such as the EPA or FCC. It also reaches less obvious obligations: the unpaid share of a cost-sharing agreement, overpayments identified by an Inspector General audit, and amounts the government collects on behalf of another person.
The 180-Day Handoff to Treasury
When a non-tax debt has been delinquent for 180 days, the originating agency is required by law to transfer it to the Secretary of the Treasury for collection.2Office of the Law Revision Counsel. 31 USC 3711 – Collection and Compromise The transfer is mandatory. Narrow exceptions apply for debts already in litigation, debts being collected through internal offset quickly enough to resolve within three years, or debts sent to a private collection contractor.
Once Treasury takes over, the debt enters a centralized system where it can be matched against nearly every federal payment the government makes. The originating agency loses primary control, and you are now dealing with Treasury’s Bureau of the Fiscal Service or one of its authorized private collectors.
What Treasury Can Take
Tax Refunds and Other Federal Payments
The Treasury Offset Program is the government’s most powerful non-tax collection tool. The Bureau of the Fiscal Service matches delinquent debts against outgoing federal payments and intercepts them before they reach you.3eCFR. 31 CFR Part 285 – Debt Collection Authorities Under the Debt Collection Improvement Act of 1996 Federal income tax refunds can be seized in full. The program also intercepts federal salary payments, vendor payments, federal retirement benefits, and certain state-issued payments. A fee of up to $25 per offset is deducted from the intercepted amount before what remains is applied to the debt.4eCFR. 31 CFR Part 285 Subpart A – Disbursing Official Offset A written notice after the fact identifies the creditor agency, the amount taken, and where to direct questions.
Social Security Retirement and Disability
Social Security retirement and disability benefits can be offset, but the law imposes limits. The government can take the lesser of the debt amount, 15% of the monthly benefit, or the amount by which the benefit exceeds $750 per month.5eCFR. 31 CFR 285.4 – Offset of Federal Benefit Payments to Collect Past-Due, Legally Enforceable Nontax Debt If your monthly benefit is $750 or less, none of it can be offset. On a $1,000 monthly benefit, the take would be capped at $150.
Payments That Cannot Be Touched
Some federal payments are shielded from offset entirely:
- Supplemental Security Income (SSI), because it is means-tested
- Black Lung Part C benefits
- Railroad Retirement tier 2 payments
- Federal student aid certified under Title IV of the Higher Education Act
- VA benefits, to the extent protected under 38 U.S.C. 5301
- Federal loan disbursements other than travel advances
- Any payment where a federal statute expressly prohibits offset
The Secretary of the Treasury can also exempt entire classes of payments upon written request from the paying agency, particularly for means-tested programs.4eCFR. 31 CFR Part 285 Subpart A – Disbursing Official Offset
Wage Garnishment Without a Court Order
If you work in the private sector, a federal agency can order your employer to withhold up to 15% of your disposable pay through administrative wage garnishment — no lawsuit, no judgment.6Office of the Law Revision Counsel. 31 USC 3720D – Garnishment Before garnishment begins, the agency must mail you a written notice at least 30 days out, explaining the debt amount and your rights to a hearing, records inspection, and repayment negotiation.7eCFR. 31 CFR 285.11 – Administrative Wage Garnishment
The 15% figure is not the whole story. The actual amount taken is the lesser of 15% of disposable pay or the amount by which weekly disposable pay exceeds 30 times the federal minimum wage. At the current $7.25 federal minimum wage, that floor is $217.50 per week. On $300 in weekly disposable pay, the garnishment would be limited to $45. If your pay sits near the floor, the garnishment could shrink to almost nothing.
When another garnishment is already in place, federal orders take priority over private ones served later, but family support orders always come first regardless of timing.8eCFR. 28 CFR 11.21 – Administrative Wage Garnishment Total garnishment across all orders is capped at 25% of disposable pay, so a large child support order can leave little room for federal collection.
Salary Offset for Federal Employees
If you work for the federal government and owe a non-tax debt to any federal agency, your employer can deduct up to 15% of your disposable pay each pay period. Deductions can come from basic pay, special pay, incentive pay, retired pay, or retainer pay. The 15% cap can only be exceeded with your written consent.9Office of the Law Revision Counsel. 5 USC 5514 – Installment Deduction for Indebtedness to the United States The agency must give written notice and offer a hearing before deductions start.
How the Balance Grows
Federal agencies must charge interest on delinquent non-tax debts. The minimum rate is the average investment rate for Treasury tax and loan accounts for the 12 months ending September 30 of the prior year, rounded to the nearest whole percentage point. For 2026, that rate is 4%.10Bureau of the Fiscal Service. Current Value of Funds Rate Once set, the rate stays fixed for the life of the debt.
Interest starts accruing from the date the agency first mails notice of the amount due. Pay within 30 days and no interest is charged. After 90 days of delinquency, agencies must also assess a penalty of up to 6% per year on the unpaid balance, and administrative collection costs get added on top.11Office of the Law Revision Counsel. 31 USC 3717 – Interest and Penalty on Claims The penalty itself does not accrue additional interest, but the combined effect still makes a modest debt grow noticeably in the first year.
Credit Bureau and CAIVRS Reporting
Federal agencies report delinquent non-tax debts to consumer credit bureaus. Before reporting, the agency must give 60 days’ written notice and an opportunity to inspect records, dispute the debt, or arrange repayment. The notice must also explain the interest rate, collection costs, and possible future actions such as lawsuits or offsets.12eCFR. 12 CFR 1208.4 – Reporting Delinquent Debts to Credit Bureaus
The reported information is limited to your name, address, taxpayer identification number, the amount and status of the debt, and the program it came from. Delinquent debts are also reported to HUD’s Credit Alert Interactive Voice Response System, or CAIVRS, which flags borrowers seeking new federally backed mortgages or student loans.
No Time Limit on Federal Collection
This is the fact that surprises most people. There is no statute of limitations on federal administrative offset for non-tax debts. The statute explicitly overrides any other provision of law, regulation, or administrative limitation that would restrict when an offset can be initiated.13Office of the Law Revision Counsel. 31 USC 3716 – Administrative Offset A student loan you defaulted on 25 years ago can still result in your Social Security or tax refund being seized today. The administrative wage garnishment statute similarly contains no time limit.14Office of the Law Revision Counsel. 31 USC 3720D – Garnishment The only exception is when a separate federal statute specifically bars offset for a particular type of debt.
Protecting a Joint Tax Refund
File a joint return with a spouse who owes a federal non-tax debt and Treasury will grab the whole refund unless you intervene. Form 8379, Injured Spouse Allocation, lets you recover your share.15Internal Revenue Service. Instructions for Form 8379, Injured Spouse Allocation This is not the same as innocent spouse relief, which addresses disputes over the tax liability itself.
You can file Form 8379 with your original joint return, with an amended return, or on its own after the return has been processed. When filing with the return, write “Injured Spouse” in the upper left corner of page 1. When filing after the return, attach copies of all W-2s and 1099s showing federal withholding for both spouses. The deadline is three years from the due date of the original return or two years from the date you paid the tax that was offset, whichever is later. Processing takes roughly 8 weeks when filed alone, and up to 14 weeks when attached to a paper return.
Your Due Process Rights and Deadlines
Before the government can use administrative offset, the creditor agency must provide written notice of the debt, access to records, an opportunity for agency review, and the chance to negotiate a written repayment agreement.13Office of the Law Revision Counsel. 31 USC 3716 – Administrative Offset Agencies must also send a demand letter before pursuing enforced collection, explaining the basis for the debt, applicable interest and penalty rates, the payment deadline (generally 30 days), and the enforcement tools available.16eCFR. 31 CFR 901.2 – Demand for Payment
Hearing deadlines are short and matter. For administrative wage garnishment, you must request a hearing within 15 business days of the mailing date on the notice to prevent the agency from issuing a withholding order while the hearing is pending.7eCFR. 31 CFR 285.11 – Administrative Wage Garnishment Miss the window and you still get a hearing, but garnishment can proceed in the meantime. For federal-employee salary offset, the typical deadline is 30 days from receipt of the notice. Late requests do not waive the right to a hearing entirely, but they eliminate the automatic pause on collection.
Settling for Less or Setting Up Payment
Federal agencies can accept less than the full amount under the Federal Claims Collection Standards when you cannot repay in a reasonable time, when collection is impractical, when pursuing the full debt would cost more than it is worth, or when there is significant doubt about the government’s ability to prove the debt in court.17eCFR. 31 CFR 902.2 – Standards for the Compromise of Claims When evaluating inability to pay, agencies weigh your age, health, current and future income, inheritance prospects, and whether assets may have been hidden or transferred. Expect to submit a current financial statement under penalty of perjury with pay stubs, tax returns, and bank statements attached.
Agencies prefer lump-sum compromises. If installments are the only option, the written agreement will provide that a default resurrects the full original balance minus what has already been paid. Debts with principal over $100,000 cannot be compromised by the agency alone and must be referred to the Department of Justice.18eCFR. 31 CFR 902.1 – Scope and Application
How to Dispute or Pay the Debt
To dispute a debt or its amount, submit your challenge in writing to the debt management office of the agency that originated it. Use certified mail with return receipt requested so you can prove delivery and date. Include the debt identification number from your Notice of Intent to Collect, any records of prior payments, and, where relevant, bankruptcy discharge papers or court orders.
When claiming financial hardship, complete a Financial Statement of Debtor form. The Bureau of the Fiscal Service uses its own version, and individual agencies may have variants.19Bureau of the Fiscal Service. Financial Statement of Debtor The form asks for detailed monthly income, household assets, and recurring expenses. Attach recent pay stubs, the last two years of tax returns, and copies of monthly bills. Complete documentation is what carries a hardship request.
For voluntary payment, the Bureau of the Fiscal Service runs an online portal at Pay.gov specifically for delinquent non-tax debts. You will need your debt identification number and the referring agency’s information; the portal accepts debit cards, PayPal, and bank account payments.20Pay.gov. Online Payment for Delinquent Nontax Debt Payments in full or under a negotiated installment plan keep the debt from escalating to garnishment or offset and stop new administrative fees from stacking on the balance. If a private collection agency contacts you, confirm they are on Treasury’s authorized list before sharing information or paying, since scammers regularly impersonate federal debt collectors.21Bureau of the Fiscal Service. Private Collection Agencies