Tags: tax | refund | seized | social security | debt

Feds Seize Taxpayer Refunds to Pay Parents' Forgotten Debts

By Sandy Fitzgerald   |   Friday, 11 Apr 2014 12:46 PM

The Treasury Department has seized $75 million in tax refunds this year for debts that have been delinquent for more than 10 years, including withholding money from people whose parents collected Social Security benefits to support them while they were still children.

Hundreds of thousands of taxpayers are being told that because of debts they never knew about, usually belonging to their parents, their refund checks are being seized, reports The Washington Post. 

The collections are allowed because of a sentence added into the federal farm bill that allows the government to collect debts delinquent for more than 10 years. The Treasury Department reports it has collected some $424 million since 2011, and this year, the Social Security Administration says it has found 400,000 taxpayers who owe $174 million on old debts, and it is enforcing collections by this summer.

Social Security spokeswoman Dorothy Clark said her agency has "an obligation to current and future Social Security beneficiaries to attempt to recoup money that people received when it was not due."

And some of that enforcement is targeting collectors' survivors like Maryland resident Mary Grice, who told The Post that her state and federal refunds were seized this year because of an old debt her mother may have incurred while collecting benefits.

Grice said her father died in 1960 when she was just 4, and her mother, Sadie, received survivor benefits from Social Security to help feed and clothe her five children until they turned 18. This year — four years after Grice's mother died — Social Security told her that someone in her family was overpaid benefits in 1977, and that the government was seizing her refund. However, she says the government didn't attempt to collect money from any other of her surviving siblings.

Grice, 58, said she is shocked by the collection of the debt, totalling $2,996 under her father's Social Security number.

Initially, Treasury held back her full state and federal refunds, totalling $4,462, but last week returned her the portion above the $2,996 owed under the old bill after the Post asked about her case.

"What incenses me is the way they went about this," she told the Post, sayings she wants all her money back. "They gave me no notice, they can’t prove that I received any overpayment, and they use intimidation tactics, threatening to report this to the credit bureaus."

Grice said she has sued the Social Security Administration, and said officials told her that six people, including herself, her four siblings, her mother, and her father's first wife, had all collected survivor's benefits. But since the government doesn't seek information about who got the money, its policy is to seek payment from the oldest sibling and go through the family until the debt is gone.

The Federal Trade Commission says that family members are not obligated to pay their dead relative's debts.

However, Social Security maintains recipients' children benefitted from the payments, so they must repay any overpayments.

Clark said the agency makes several attempts to contact debtors before seizing tax refunds or enforcing collection activities. A private contractor to seeks current addresses, and the agency is supposed to halt collections if notices are returned as undeliverable.

People are fighting back against the collections, Clark said, with more than 1,200 appeals being filed. However, taxpayers have won back about 10 percent of the appeals.

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