Tennessee Unemployment Overpayment: Appeals, Waivers, and Fraud

If you received a Notice of Overpayment for a Tennessee unemployment overpayment, you generally have three paths: appeal the decision within 15 days, request a waiver within 90 days if the overpayment wasn’t your fault, or arrange repayment. The mailing date on the notice starts every clock, and missing the appeal deadline makes the determination final.

Read the Notice First

The Notice of Overpayment tells you the total amount owed, any penalties, the reason for the overpayment, and your appeal rights. It also states whether the Tennessee Department of Labor and Workforce Development (TDLWD) classified the overpayment as fraud or non-fraud, which controls almost everything that happens next.¹

Look at the mailing date printed on the notice, not the date it arrived in your mailbox. That date starts both the 15-day appeal window and the 90-day waiver window. Appeals and waivers are separate remedies with different deadlines and different purposes, and you can pursue both.

Fraud or Non-Fraud: Why the Classification Matters

A non-fraud overpayment means you received benefits you weren’t entitled to but didn’t do anything deceptive. The most common cause is an employer contesting your eligibility and winning on appeal weeks after you already collected payments. Calculation errors and unintentional shortfalls in work-search activity also fall in this category.¹

A fraud determination means the TDLWD concluded you knowingly misrepresented or withheld facts to collect benefits. Common examples are failing to report wages earned while claiming benefits or misstating why you left a job. Fraud carries financial penalties on top of the overpayment and can disqualify you from future benefits.²

Only non-fraud overpayments are eligible for a waiver. If the notice shows a fraud finding, your only route to eliminate the debt is winning an appeal that overturns that finding.

Appealing Within 15 Days

If the amount is wrong, you were actually eligible for the benefits, or you disagree with a fraud finding, you have 15 calendar days from the mailing date of the notice to appeal.³ Miss it and the determination becomes final.

File the appeal online by logging into your Unemployment e-Services account at Jobs4TN.gov, selecting the determination, and clicking “File Appeal.” A hearing officer then takes testimony and reviews documents from both sides before issuing a decision based only on what’s presented.⁴

Bring everything you have: pay stubs, employer correspondence, separation notices, records of your job search activities. The hearing officer will not go looking for evidence for you. Showing a miscalculation or actual eligibility for the weeks in question can reduce or eliminate the overpayment.

Second-Level Appeal

If the hearing officer rules against you, you have 15 calendar days from the mailing date of that decision to appeal in writing to the Office of Administrative Review (OAR). This step must be submitted by mail or fax and cannot be filed online.⁵ The OAR usually reviews the existing record without a new hearing, though it can order one if new evidence justifies it. It can affirm, modify, or reverse the decision, or send the case back.

Requesting a Waiver Within 90 Days

If the overpayment wasn’t your fault, you can ask the TDLWD to forgive the debt. You have 90 days from the date on the overpayment notice to submit a waiver request.³ Both of the following must be true: the overpayment cannot be due to your fault or fraud, and repayment would cause financial hardship.¹

An appeal and a waiver do different jobs. An appeal challenges whether the overpayment exists or whether the amount is right. A waiver concedes the overpayment but asks the state not to collect. Filing the appeal within 15 days and the waiver within 90 days gives you a backup if the appeal fails. If the TDLWD denies the waiver, you can appeal that denial through the same hearing process.³

Repayment Options

Once the overpayment is final, contact the Unemployment Insurance Recovery Unit at 844-817-0619 to arrange repayment.⁶ You can pay in full online or by mail with a check or money order; if mailing, include your full name, the last four digits of your Social Security number, and your account number.

If you can’t pay all at once, the Recovery Unit can set up a monthly payment plan. The TDLWD also recovers overpayments by offsetting future unemployment benefits: if you file a new claim while an old overpayment is outstanding, the state deducts from your new benefits until the debt is satisfied.⁷

Penalties for Fraud

Fraud findings add two separate percentage penalties on top of the overpayment itself:

A federal compliance penalty of 15% of the overpaid amount, required by federal law and deposited into the state’s unemployment compensation fund.
A state penalty of 15% for a first fraud finding, rising to 35% for a second or subsequent instance.

Interest accrues on top of the overpayment and penalties at up to 1.5% per month starting 30 days after the TDLWD mails the determination notice. A pending appeal does not pause the interest clock.⁸

A fraud determination also disqualifies you from collecting unemployment benefits for 4 to 52 weeks, depending on how serious the TDLWD considers the conduct. You stay disqualified from future benefits for as long as any part of the overpayment or interest remains unpaid, so even after the disqualification period ends, no new benefits pay out until the old debt is cleared.²

If You Don’t Repay

The state has several collection tools. The most common is intercepting your Tennessee state tax refund, which state law specifically authorizes to recover amounts owed to the unemployment compensation fund.⁹ The TDLWD can also pursue federal tax refunds through the Treasury Offset Program, and it can refer the debt for wage garnishment or civil action.⁶

Social Security benefits are generally protected from garnishment for state unemployment debts; federal law limits Social Security withholding to obligations like child support, federal taxes, and federal non-tax debts.¹⁰

The state has six years from the date the overpayment was established to collect. After that, uncollected balances are written off. Six years of refund intercepts, benefit offsets, and possible wage garnishment gives the TDLWD ample time to recover the debt, so waiting out the clock isn’t a practical plan.

Taxes on Benefits You Pay Back

Unemployment benefits are taxable, and you likely reported the overpaid amount on your federal return for the year you received it. Repaying some or all of it may let you recover taxes paid on money you gave back. If you repay in the same tax year you received the benefits, you reduce the unemployment income you report. If the repayment happens in a later year and exceeds $3,000, you can generally claim a credit under the federal “claim of right” doctrine. Smaller repayments have more limited deduction rules. Because the timing relative to the tax year matters, a tax professional can help you sort out the correct approach.

1
Tennessee Department of Labor & Workforce Development. Benefit Overpayments
2
Justia Law. Tennessee Code 50-7-303 – Disqualification for Benefits
3
Justia Regulation. Tennessee Comp. R. & Regs. 0800-09-01-.26 – Suspected Overpayments
4
Tennessee Department of Labor & Workforce Development. Appeal an Agency Decision
5
Tennessee Department of Labor & Workforce Development. Unsuccessful Appeals
6
Tennessee Department of Labor & Workforce Development. Set Up a Repayment Plan
7
Justia Law. Tennessee Code 50-7-304 – Procedure for Claims and Payment of Benefits
8
Justia Law. Tennessee Code 50-7-715 – Interest on Amount Due
9
Justia Law. Tennessee Code 67-1-1808 – Offset of the Taxpayer’s Refund
10
Social Security Administration. Can My Social Security Benefits Be Garnished or Levied?