Citing decades-old claims, feds seize tax refunds

by Walter Olson on April 11, 2014

Marc Fisher reporting in the Washington Post:

Across the nation, hundreds of thousands of taxpayers who are expecting refunds this month are instead getting letters like the one [Mary] Grice [of Takoma Park, Md.] got, informing them that because of a debt they never knew about — often a debt incurred by their parents — the government has confiscated their check.

The Treasury Department has intercepted $1.9 billion in tax refunds already this year — $75 million of that on debts delinquent for more than 10 years, said Jeffrey Schramek, assistant commissioner of the department’s debt management service. The aggressive effort to collect old debts started three years ago — the result of a single sentence tucked into the farm bill lifting the 10-year statute of limitations on old debts to Uncle Sam.

No one seems eager to take credit for [the provision]…

While a variety of stale disputes are involved, some of the most controversial involve alleged Social Security overpayments to long-deceased parents that the government says it has a right to reclaim because they contributed or might have contributed to the support of now-grown children. Targets say they are helpless to contest the seizures in many cases because financial records have long since been thrown out, in line with the IRS’s own guidelines which do not encourage the keeping of financial records for decades. State as well as federal refunds can be intercepted, and the taxpayer who wants to argue must sue to get the money back.

A spokeswoman says the feds attempt to contact targets about the claims before attaching refunds, but the Washington Post’s report cites examples in which notice was sent to decades-old post office boxes or addresses, even though both tax and Social Security authorities held current correct addresses for the taxpayer.

Need it be added that many of the methods the government is using would be deemed unlawful if asserted by creditors trying to collect private debts? To name only the most egregious of the problems, children cannot ordinarily be made to pay parents’ debts, even when there is a writing by the parent acknowledging the debt as valid (which will ordinarily be lacking in after-the-fact assertions of overpayment).

It is at most a minor ironic consolation that taxpayers are likely to react to these outrageous tactic by scaling back hard on the widespread practice of voluntary over-withholding, reasoning that it is unsafe to build up a big refund if authorities can snatch it away for unpredictable reasons with little hope of recourse.

P.S. More from J.D. Tuccille, Reason.

Update: Victory! Social Security Administration announces Apr. 14 that it’s suspending collection of debts older than 10 years (& welcome Andrew Sullivan readers).

{ 3 trackbacks }

The Debts of the Parents are Paid by their Children; Like It or Not | Hunt & Associates, PC
04.14.14 at 12:17 pm
Victory! Social Security suspends stale-debt collection program - Overlawyered
04.15.14 at 12:45 am
The Bogosity Podcast » Bogosity Podcast for 21 April 2014
04.20.14 at 4:00 pm

{ 16 comments }

1 Gasman 04.11.14 at 4:25 pm

Likewise , it is understood that the only folks who will pay a penalty for not meeting the Obama insurance emandate are those with tax refunds due.
Too many people are wedded to getting a check in the spring. If more people managed their withhold so as to not let the government have a free 12 month float, then they would also maintain a healthier distaste for taxation in general when writing a balance due every April.

2 Sherri 04.11.14 at 6:39 pm

If a bank had done this, the CFPB would be up in arms. If only the government could live up to the standards the government sets for private business…….

3 Patti 04.11.14 at 10:54 pm

This happened to my husband last year. They said it was because of an over payment made to one of his parents. When asked why we hadn’t received notice they said they had sent it to his last known address which was 10 years old! And yet the SS sends him a notice, before his birthday, every year at our current address (the statements everyone gets yearly that show how much SS you have paid and what you would get if you became disabled). We appealed it through our local SS office and were given the money back. Don’t think you can’t fight it.

4 Canvasback 04.11.14 at 11:04 pm

I can’t believe this is even legal, let alone Federal policy. Looks like our sinking ship of state has reached a new low.

5 marco73 04.12.14 at 7:27 am

Looks like our ship of state is just bringing back all those golden oldies we threw out with the Brits in 1776.
Soon enough, we’ll have stocks in the public square. With these new collection methods, can debtor’s prison be really that far away?

6 debbie 04.12.14 at 7:19 pm

They did this to me this year.

7 Ed 04.12.14 at 7:39 pm

Think of the possibilities, a parent has a 999 year sentence, throw the kid, grandkids and great grandkids in prison to serve the remainder of the sentence. We could reverse 200 year of Constitutional law and take things back to the days of Dickens. Bring on the work houses and debtors prisons.

8 Bill Poser 04.12.14 at 10:08 pm

The lack of due process and the sneaky change in the statute of limitations are bad, but I am stunned at the claim that children are responsible for overpayments to their parents from which they may have derived some benefit. What can the legal basis for this be? It is long-settled law that children are not responsible for their parents’ debts.

9 JJ 04.13.14 at 2:38 am

I keep seeing this vague phrase that a “Single sentence” in the farm bill is what gives authorization to do this. I can’t find one single reference anywhere as to EXACTLY which sentence they are talking about. Every place that has a link just goes to the entire bill. Any ideas?

10 Justin 04.13.14 at 6:15 am

@JJ -

I assume that the section in question is Section 14219 of the bill

Sec. 14219. Elimination of statute of limitations applicable to collection of debt by administrative offset.

(a) Elimination.–Section 3716(e) of title 31, United States Code,
is amended to read as follows:
“(e)(1) Notwithstanding any other provision of law, regulation, or administrative limitation, no limitation on the period within which an offset may be initiated or taken pursuant to this section shall be effective.
“(2) This section does not apply when a statute explicitly
prohibits using administrative offset or setoff to collect the claim or type of claim involved.”.
(b) <> Application of Amendment.–The amendment made by subsection (a) shall apply to any debt outstanding on or after the date of the enactment of this Act.

11 OBQuiet 04.13.14 at 9:40 am

I am sure I am not the only person to object to the idea of changing the time frame for enforcement this way. I could possible accept that it would start extending from some fixed time onward but to tell people that they no longer needed their records to defend themselves and then change things to catch them if they disposed of them is absurd.

But I think it would be easy enough to simple ask for proof of payments being made first. I mean, did the government keep all the signed canceled SS checks from the 70s on file somewhere? Shouldn’t they need to prove that the payments were accepted first before seeking to have them returned? And even if they do HAVE them, how would they find them if they really kept that many millions of scraps.

12 HFB 04.13.14 at 12:40 pm

So the Farm bill covers everything now? Or, the Farm bill was the best place for this? no discussion? Just put it in some bill that’s gonna pass and, voila!, mo’ money, mo’ money, mo’ money!

13 JJ 04.13.14 at 10:13 pm

@Justin
Thanks.

14 Jonathan Bailey 04.14.14 at 11:50 am

“Think of the possibilities, a parent has a 999 year sentence, throw the kid, grandkids and great grandkids in prison to serve the remainder of the sentence.”

Ed, this is what North Korea does now. If you get on the wrong side of the government there you get put in prison, along with your parents, grandparents and children.

15 DEM 04.14.14 at 1:36 pm

When the government feels unconstrained to re-write the rules in the middle of the game, and then enforce them in a most unreasonable way, what, if anything, is safe?

16 DNTMNDMYBSNS 04.14.14 at 6:41 pm

Isn’t this against Article 1, Section 9, Clause 3 of the Constitution?

“No Bill of Attainder or EX POST FACTO Law shall be passed.”

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