Tags: tax | refunds | debt | IRS

US Govt Confiscating Tax Refunds Over Parents' Old Debts

Monday, 14 Apr 2014 01:23 PM

By Joe Battaglia

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Before earmarking anticipated federal tax refunds this year, Americans should first make sure that any deceased parents were debt-free before their passing.

According to a report in The Washington Post, the government has confiscated the refunds of hundreds of thousands of taxpayers over the past three years because of unknown debt, often incurred by their parents.

Jeffrey Schramek, assistant commissioner of the U.S. Treasury Department's debt management service, told The Post that officials have intercepted $1.9 billion in tax refunds this year, including $75 million on debts delinquent for more than 10 years.

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A one-sentence change to the 2008 farm bill opened the door for the government to be able to recoup old outstanding debts by lifting a 10-year statute of limitations.

The government began its earnest push to collect on old debts in 2011. Since then, according to The Post, the Treasury Department has recovered $424 million in debts that were more than 10 years old.

Additionally, the Social Security Administration has found 400,000 taxpayers owing a collective $714 million on debts over a decade old. Proceedings against all of them will likely begin this summer.

"We have an obligation to current and future Social Security beneficiaries to attempt to recoup money that people received when it was not due," Social Security spokeswoman Dorothy Clark told The Post.

The Federal Trade Commission advises on its website that "family members typically are not obligated to pay the debts of a deceased relative from their own assets," however Social Security officials say that if children indirectly received assistance from public dollars paid to a parent, the children’s money can be taken, no matter how long ago any overpayment occurred.

According to Clark, taxpayers have won just 10 percent of the more than 1,200 appeals that have been filed on old cases. The Post spoke with a sampling of those who have appealed.

Mary Grice, who works for the Food and Drug Administration, claims her refunds were seized over $2,996 allegedly overpaid to someone in her family — the government isn't sure who — out of survivor's benefits paid to her mother after her father's death in 1960.

They haven't explained why they're targeting Grice, the middle of five children; have provided no proof she received any money; and have threatened to report her to a credit bureau. And though they have her current address, they sent a notice about the debt to a PO Box she last rented in 1979.

"The craziest part of this whole thing is the way the government seizes a child’s money to satisfy a debt that child never even knew about," Grice's attorney, Robert Vogel, told The Post. "They'll say that somebody got paid for that child's benefit, but the child had no control over the money, and there's no way to know if the parent ever used the money for the benefit of that kid."

Mike and Brenda Samonds told The Post that the government seized his refund over an overpayment of $189.10 to his mother, who died 33 years ago. The government's notice was mailed to the house his mother lived in 40 years ago.

"It was never Mike's money, it was his mother's," Brenda Samonds said. "We could never get one sentence from them explaining why the money was taken."

Ted Verbich says the government snatched his Maryland tax refund last month, without warning, over a 36-year-old alleged debt of $172, and provided no documents to back the claim. He has given up on getting back the money but has demanded a receipt indicating the debt has been resolved once and for all.

"I'll put in the request," Verbich said a clerk told him, "but in reality, you'll never get anything."

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