Writeoff

1
Write-off

• WHAT IS WRITE-OFF?
• Write-off is an accounting action that occurs
  when the agency determines that the debt has no
  value for accounting purposes. As a result, the
  agency no longer records the debt as having any
  value as an asset on its accounting reports and
  reflected on certain management reports such as
  the Treasury Report on Receivables.
• Rules for writing off debts are contained in OMB
  Circular No. A-129.

2
Write-off - Classification

• WHAT ARE THE CLASSIFICATIONS
• OF WRITE-OFF?
• After write-off, a debt must be classified based
  on whether collection action will continue.
• The two classifications of write-off are
• Currently Not Collectible (CNC) - This means
  cost-effective collection action will continue.
• Close-out - This means that the agency does not
  intend to take any further collection action
  (passive or active) on the debt.

3
Write-off
WHEN SHOULD AN AGENCY WRITE-OFF A DEBT?

• Generally, write-off is mandatory for debts
  delinquent for more than 2 years (OMB Circular
  A-129).
• In those cases where material collections can be
  documented to occur after two years, the debt
  cannot be written off until the estimated
  collections become immaterial.
• Write-off is not directly tied to termination of
  collection action. Write-off may occur before,
  concurrently with, or after termination of
  collection action.

4
Write-off

• HOW IS WRITE-OFF ACCOUNTED FOR BY THE AGENCY?
• Write-off of debts must be made through the
  allowance account. Debts may not be written off
  directly to expense.

5
Write-off Currently Not Collectible (CNC)

• WHAT SHOULD AN AGENCY DO
• REGARDING DEBTS THAT HAVE BEEN
• WRITTEN OFF AND CLASSIFIED AS CNC?
• The agency should continue cost-effective
  measures to collect the debt, including referral
  of debts to FMS for cross-servicing and referral
  of debts to FMS for collection through offset
  when appropriate.
• The agency may consider if termination of
  collection action is appropriate, under the rules
  governing termination of collection action.
• If material, the agency should disclose in a note
  to its financial statements, the amount of
  written-off debt under collection and the amount
  it expects to collect.
• The agency should also have established
  accounting procedures to account for collections
  on written-off debt.

6
Write-off Close Out
WHAT ARE THE RULES CONCERNING WRITTEN OFF DEBT
CLASSIFIED AS CLOSE-OUT?

• The classification of a written of debt as
  close-out may occur at the time of the initial
  write-off, or at a time after the debt has been
  written off and classified as CNC.
• The agency must have taken all appropriate steps
  to collect a debt prior to close-out including,
  as applicable, referral to FMS for TOP and
  cross-servicing.

7
Write-off Close Out
WHAT ARE THE RULES CONCERNING WRITTEN OFF DEBT
CLASSIFIED AS CLOSE-OUT? (Continued)

• The agency must have terminated collection action
  (both passive and active) on the debt or is
  terminating collection action simultaneously with
  the classification of close-out.
• The agency must determine if written-off/closed-ou
  t debt must be reported to the IRS as potential
  income to the debtor on form 1099-C. The
  requirements and the procedures to report
  potential income to the debtor is outlined in IRS
  regulations
• (26 CFR 1.6050P-1).

8
Write-off Close Out

• Congratulations, Students!
• You now are experts at writing- off debts.
• You can now be called Terminators/Writer-
  offers.
• To complete your education you must learn
  about Discharge of Indebtedness.
• PROCEED TO THE NEXT PART OF THE TUTORIAL -