Uncle Sam Seizes Children’s Tax Refunds To Pay Parents’ Debts
FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
April 15, 2014
Uncle Sam Seizes Children’s Tax Refunds To Pay Parents’ Debts
IN THIS ISSUE:
1. Government Targets Children For Parents’ Decade-Old Debts
2. Social Security Administration Jumps on the Bandwagon
3. Regulators & Bureaucrats Desperate For More Revenue
4. Our “ALPHA ADVANTAGE” Webinar is Tomorrow at 2:00 PM Eastern
This is one of those special weeks when I get to bring you key information that you probably haven’t seen elsewhere. As a speed-reader, I look at a large volume of information every week before deciding what topics to publish on Tuesdays. It was early Saturday evening when I ran across today’s topic which is getting scant coverage in the media, but everyone reading this needs to understand this latest (and possibly illegal) money-grab by our government.
Today, millions of Americans will file their 2013 income tax returns, and many are expecting to receive a tax refund from the IRS in a few weeks. Many income tax filers expecting a refund already have plans for how that refund check will be spent. But what you may not know is that the government can and does seize tax refunds from the children of parents who are deemed to owe the government money.
The government is now going through old records to see if it overpaid Social Security benefits to people in the past. If it thinks it did, it can now seize the IRS tax refund checks of the children of those people it thinks it overpaid. Uncle Sam can seize your refund without your knowledge or consent, even without proof or exact details. It has been doing this for the last three years, confiscating hundreds of thousands of Americans’ tax refunds. It has already confiscated $1.9 billion in tax refunds this year alone.
Worst of all, much of this supposed debt is over 10 years old. The Social Security Administration says it has identified over 400,000 children of deceased parents in an effort to collect billions in overpayments of benefits in years past, including $714 million that is over 10 years old. The SSA says it will start proceedings against all of those people by this summer.
This is critical information that all Americans should know! Feel free to forward today’s E-Letter to anyone who can benefit from this knowledge.
Government Targets Children For Parents’ Decade-Old Debts
Let’s kick this discussion off with a recent real-world example. A few weeks ago, with no notice, the US government intercepted Mary Grice’s tax refunds from both the IRS and the state of Maryland. Grice had no idea that Uncle Sam had seized her tax refunds until some days later, when she got a letter saying that her refund had gone to satisfy an old debt to the government – a very old debt.
When Grice was four, back in 1960, her father died, leaving her mother with five children to raise. Until the kids turned 18, Sadie Grice got survivor benefits from Social Security to help feed and clothe them.
Now, Social Security claims it overpaid someone in the Grice family – it’s not even sure who – in 1977. After 37 years of silence, four years after Sadie Grice died, the government is coming after her daughter Mary. Why the Feds chose to take Mary’s money, rather than her surviving siblings, is a mystery.
Across the nation, hundreds of thousands of taxpayers who are expecting refunds this month or next are instead getting letters like the one Grice got. It will inform them that because of a debt (ie – an alleged overpayment of Social Security benefits) they never knew about – often a debt incurred by their parents – the government has confiscated their refund check(s).
The government has confiscated $1.9 billion in tax refunds already this year – $75 million of that on debts delinquent for more than 10 years, according to 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 2008 farm bill that lifted the 10-year statute of limitations on old debts owed to Uncle Sam.
No one seems eager to take credit for reopening all these long-closed cases. A Social Security spokeswoman says the agency didn’t seek the change and suggested it was the Treasury. Treasury says it wasn’t guilty and suggested it was Congress. Congressional staffers interviewed by The Washington Post weren’t sure either.
The only explanation the government provides for suddenly going after decades-old debts comes from Social Security spokeswoman Dorothy Clark: “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 Administration Jumps on the Bandwagon
Since the drive to collect on very old debts began in 2011, the government has collected $424 million in debts that were more than 10 years old. Those debts were owed to several federal agencies, but the one that has many Americans howling this tax season is the Social Security Administration (SSA), which has confiscated $1.9 billion in tax refunds already this year.
The SSA has also found over 400,000 taxpayers who it believes collectively owe billions in benefits overpayment, including $714 million on debts that are more than 10 years old. The agency expects to start proceedings against all of those people by this summer.
“It was a shock,” said Mary Grice, 58. “What incenses me is the way they went about this. 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.”
Social Security officials told Grice that six people – Grice, her four siblings and her father’s first wife, whom she never knew – had received excess benefits under her father’s account. The government doesn’t look into exactly who got the overpayment; the policy is to seek compensation from the oldest child and work down through the family until the debt is paid.
The Federal Trade Commission, on its website, advises Americans that “family members typically are not obligated to pay the debts of a deceased relative from their own assets.” But Social Security officials say that if children indirectly received assistance from public dollars paid to a parent, the children’s tax refunds can be taken, no matter how long ago any overpayment may have occurred.
“While we are responsible for collecting delinquent debts owed to taxpayers, we understand the importance of ensuring that debtors are treated fairly,” Treasury’s Schramek said in a statement responding to questions from The Washington Post. He said Treasury requires that debtors be given due process. Yet unilaterally confiscating tax refunds is hardly due process!
Social Security spokeswoman Dorothy Clark, who declined to discuss Grice’s or any other case, even with the taxpayer’s permission, said the agency is “sensitive to concerns about our attempts to arrange repayment of overpayments.” She said that before taking any money, Social Security makes “multiple attempts to contact debtors via the U.S. Mail and by phone.”
Mary Grice, who works for the Food and Drug Administration and lives in Takoma Park, MD in the same