April 17, 2014

You filed your tax returns weeks ago, but you still haven’t received your refund check. What’s the deal?

Instead of checking “Where’s My Refund?” on the IRS website, you might want to check with the Social Security Administration. If you or anyone in your family collected Social Security at any time during this century or the last, the SSA might very well have seized your refund to offset alleged overpayments.

$75 Million Seized in 2014

Since 2011, the Treasury Department has collected more than $424 million on behalf of the SSA and other federal agencies for debts that that were more than 10 years old, with $75 million being collected during 2014, according to an April 10 article in the Washington Post.

Following the April 10 Post report on the practice, the SSA suddenly announced an about-face on April 14, stating that the agency would immediately cease seizing refunds of family members for decades-old overpayments. As part of the announcement of the repeal of the policy, SSA Acting Commissioner Carolyn Colvin issued a statement instructing taxpayers who believe that their tax refunds were unjustly seized should contact the agency to “seek options to resolve the overpayment.”

Families Held Accountable for Taxes of the Deceased

Before the announcement, the SSA claimed it had discovered overpayments on behalf of 400,000 taxpayers or their family members, including deceased relatives, with a collective debt totaling $714 million. According to the Post, the SSA was expecting to have collection efforts fully underway by the summer of 2014. This policy would seem to be in direct violation of a statement present on the Federal Trade Commission website that family members cannot be held financially accountable for the tax obligations of deceased relatives. But the Social Security Administration had previously defended its actions, claiming that children and other relatives indirectly benefited from improperly received benefits and could therefore be held liable for repaying the agency.

How did this happen?

The seizures began as a result of a single sentence that Congress quietly slipped as an amendment into the 2008 Farm Bill abolishing the 10-year statute of limitations on debts due to the federal government. In the most egregious cases involving the SSA, the debts were not even incurred by the individuals whose refunds were seized, but by family members, some of which were deceased. Worse, the seizures allegedly took place with no prior notice, with affected taxpayers receiving a letter from the SSA after the fact informing them that their refunds had been offset.

Mary Grice’s 54-year-old tax debt

In one especially shocking case reported by the Post, the SSA seized the tax refunds for Mary Grice, a federal worker in Takoma Park, Maryland to offset a $2,996 debt that was allegedly incurred against the Social Security number of her father – who died in 1960, when Grice was a small child. According to the SSA, Grice, her father, her four siblings and his first wife, whom Grice never knew, all collected benefits, but the agency did not specify which family member(s) had actually collected overpayments. Instead, the Post reported that the agency followed a policy of seeking repayment from the oldest living sibling, working its way through the family until its debt has been repaid in full.

In response to the seizure, Grice sued the SSA, claiming that her right to due process had been violated because she never received prior notice, despite having lived at the same address since 1984, and receiving notices of her Social Security benefits at that address every year. Instead, the SSA claims it sent its notice to a post office box that Grice rented only from 1977 to 1979. Worse, the SSA conceded that it had no records to justify collecting the overpayment that Grice’s family allegedly received. (The state of Maryland also seized tax refunds from Grice, who lost a total of $4500 to seizures.)

More Taxpayers Stepping Forward

After the original report published by the Washington Post, hundreds of taxpayers stepped forward with similar claims of unjust seizures of their tax refunds. Democratic senators Barbara Boxer of California and Barbara Mikulski of Maryland urged the SSA to reconsider the practice. Republican Sen. Charles Grassley of Iowa sent a letter to Treasury Secretary Jack Lew on April 14 stating that while the change in regulation did authorize the Treasury Department to collect old debts, there was no language authorizing the seizure of one taxpayer’s assets to cover the obligations incurred in the name of another taxpayer. Grassley also expressed concern that taxpayers were not given proper notice or allowed to inspect records allegedly supporting the seizure of tax refunds –an apparent violation of the law.

Photo: IEEE