Treasury Offset Program

What Is the Treasury Offset Program?

The Treasury Offset Program (TOP) is a federal debt collection tool that intercepts federal payments owed to you and redirects them to satisfy delinquent federal debts. For EIDL borrowers, this means your federal tax refunds, certain Social Security payments, and other federal payments can be seized to repay your defaulted EIDL loan.

TOP is administered by the Bureau of the Fiscal Service within the U.S. Department of the Treasury. It is one of the most powerful collection tools the federal government has -- no court order is needed, and the offset happens automatically once the debt is referred.

What Triggers a Treasury Offset

The process works as follows: 1. You default on your EIDL (typically 150+ days of non-payment). 2. The SBA sends demand letters and attempts to collect. 3. If unsuccessful, the SBA refers the debt to Treasury's cross-servicing program. 4. Treasury enters the debt into the TOP database. 5. Any federal payment owed to you is automatically checked against TOP. 6. If a match is found, the payment is partially or fully redirected to your EIDL balance.

You will receive notice before the debt is referred to Treasury and before the first offset occurs. These notices are critical -- they contain information about your right to dispute the debt and request a review.

What Payments Can Be Offset

• Federal tax refunds -- the most common offset for EIDL borrowers
• Social Security benefits -- up to 15% can be offset, with a minimum $750/month protected
• Federal salary -- if you are a federal employee, up to 15% of disposable pay
• Federal contractor payments -- payments owed to you as a government contractor
• Other federal payments -- OPM retirement, federal travel reimbursements, vendor payments

State tax refunds are generally NOT subject to Treasury offset for SBA debts. However, some states have reciprocal agreements for certain debts.

How to Stop Treasury Offsets

Several paths can stop or prevent Treasury offsets:

• Enter a repayment agreement: Contact the SBA or the collection agency handling your account and negotiate a payment plan. Active repayment agreements typically stop new offsets.
• Submit an Offer in Compromise: Request a hold on collection while your OIC is reviewed.
• File for bankruptcy: The automatic stay stops all collection, including Treasury offsets.
• Request hardship review: If the offset causes extreme financial hardship, you may request a reduction or temporary halt.
• Dispute the debt: If the debt amount is wrong or you believe it is not your obligation, submit a written dispute.

Injured Spouse and Joint Tax Returns

If you file a joint tax return and the EIDL is only in one spouse's name, the non-debtor spouse can file IRS Form 8379 (Injured Spouse Allocation) to protect their share of the tax refund from offset. This must be filed with the tax return or within 3 years. The IRS will calculate each spouse's share of the refund and release the non-debtor spouse's portion.