45 CFR 303.100
If the non-custodial parent’s (NCP’s) income has been withheld due to a CSS administrative error, you must promptly refund the money to the NCP, even if the money has been sent to the custodial parent (CP). For example, the NCP has no current support due, all arrears are paid in full, and income withholding was not terminated promptly, resulting in the NCP's case being overpaid. Consult with your management chain (Manager, Associate Regional Director, Regional Director, and CSS Director) if you need to refund money to the NCP due to an administrative error.
Income that has been withheld and disbursed in good faith is not an administrative error and should not be returned to the NCP. However, you may offset what the NCP has overpaid to the CP by reducing the amount of current support until the “overpaid” amount has been recovered. Contact the CP and explain the problem and attempt to arrive at an agreement about how much and for how long the current support amount will be reduced. If the CP does not agree to a deduction or a specific monthly amount, consult with your management chain about the next course of action to take. You could still proceed with a deduction, or you could inform the NCP that he will need to make arrangements directly with the CP to recover the money.
EXAMPLE: the NCP or the CP in a Non-IV-A case did not inform CSS that their support order for $500 per month was modified downward to $300 per month. CSS continued to collect and disburse the prior higher amount of $500 per month until three months later the NCP notified CSS of the downward modification. Since the NCP had been current under the old order, he had overpaid the CP a total of $600 ($500-$300=$200x3=$600.) You contact the CP and NCP and arrange to have the NTW reduced by half ($150) for 4 months ($150x4=$600) so that at the end of this period he is again current. Create a self-alert to review the case at the end of the repayment time period and manually amend the NTW at that time.