The President has signed H.R. 2608, The SSI Extension for Elderly and Disabled Refugees Act, into law. The legislation amends IRC §6402 to allow the IRS to offset an individual's federal income tax overpayment by any amount owed to a State for a “covered unemployment compensation debt.”

Covered Unemployment Compensation Debt is defined as a past-due debt (including penalties and interest) for erroneous payment of State unemployment compensation due to fraud which has become final under State law and remains uncollected for not more than 10 years.

The offset cannot be made before the IRS applies overpayments to:

1. Any other debt that the taxpayer has with the IRS,
2. Past-due child support obligations, or
3. Any past-due legally enforceable debt owed to a federal agency.

For an offset to take place, the State address on the Federal return for the taxable year of the overpayment must be in the State that is seeking the offset. States must allow individuals at least 60 days notice to present evidence that all or part of the State tax liability is not legally enforceable, or is due to fraud, before beginning proceedings to collect the debt.