Uncle Sam Seizes Children’s Tax Refunds To Pay Parents’ Debts

Uncle Sam Seizes Children’s Tax Refunds To Pay Parents’ Debts

Uncle Sam Seizes Children’s Tax Refunds To Pay Parents’ Debts

by Gary D. Halbert

April 15, 2014

Uncle Sam Seizes Children’s Tax Refunds To Pay Parents’ Debts


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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 apartment she’s lived in since 1984, never got any notice about a debt. Social Security officials told her they had sent their notice to her old Post Office box in Roxboro, NC. Grice rented that box from 1977 to 1979 and never since. And Social Security has Grice’s current address, and every year it sends her a statement about her benefits.

Grice, the middle of five children, said neither of her surviving siblings – one older, one younger – has had any money taken by the government. When Grice asked why she had been selected to pay the debt, she was told it was because she had an income and her address popped up –   the correct one this time.

When Grice contacted the SSA about a waiver, she was told there was little point in seeking a waiver of her debt. Collections can only be halted if the person passes two tests, Clark said: The taxpayer must prove that he “is without fault, and that repayment of the overpayment would deprive the person of income needed for ordinary living expenses.”

More than 1,200 appeals have been filed on these very old cases, Clark said; taxpayers have won only about 10% of those appeals.

The government initially confiscated the full amount of Grice’s federal and state refunds, a total of $4,462. Earlier this month, after The Washington Post inquired about Grice’s case, the government returned the portion of her refund above the $2,996 owed on her father’s account. How nice of them! But unless the SSA can prove that she ever received any excess benefit from the overpayment, Grice wants all of her money back.

Grice found a lawyer willing to take her case without charge. Her attorney, Robert Vogel, is concerned about the constitutional violations he sees in the retroactive lifting of the 10-year statutory limit on debt collection. He asks, “Can the government really bring back to life a case that was long dead? Can it really be right to seize a child’s money to satisfy a parent’s debt?” Apparently, the answer is YES.

Vogel continued, “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. 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.”

Grice filed suit against the Social Security Administration in federal court earlier this month, alleging that the government violated her right to due process by holding her responsible for a $2,996 debt supposedly incurred under her father’s Social Security number.

Regulators & Bureaucrats Desperate For More Revenue

It remains to be seen whether Mary Grice and her lawyer will succeed in getting her confiscated tax refunds back or not. But here’s the bottom line:

Many other taxpayers whose refunds have been taken say they’ve been unable to contest the confiscations because of: 1) the legal cost, 2) Social Security cannot provide records detailing the original overpayment and 3) the citizens, following advice from the IRS to keep financial documents for just three years, had long since trashed their own records – if they ever had them at all.

Tax refunds are clearly becoming the new “promised land” for government regulators and bureaucrats desperate for more revenues. We already know that confiscating tax refunds is the only real way the IRS will be able to impose Obamacare non-compliance penalties, and now the Social Security Administration has jumped on that bandwagon as well.

But there’s a more powerful and disturbing message here. Remember that the people who benefited from these alleged Social Security overpayments have not committed any crime – that’s why the government apparently doesn’t need to provide any proof or real documentation. They simply seize the tax refunds… because they can.

It’s much more likely that the SSA simply screwed up benefits paid in the past, and now expects the descendants of these people to pay up. And again, the money comes out first before you can protest and find out why. This has never happened before the government started this practice in 2011, but as I have warned in the past, anything is fair game for the Obama administration.

So, now the government has another powerful way to make sure you don’t get a tax refund. First, getting a tax refund means you’ve given the government a free loan for the last 12 months. Second, as noted above, tax refunds are the only way you can be punished – rightly or wrongly – for failing to comply with any Obamacare individual mandate.

And third, your tax refund is now a possible target for government bureaucrats who screwed up in the past and want to come after your money to make it right. If the SSA can do it, what’s to stop other agencies?

After hearing this story, you wouldn’t think anyone would have to remind the public that Washington already controls too much of their money and has trampled on too many of our financial rights. But I will do so anyway since so many politicians and other elites don’t seem to be backing down on their incessant calls for more regulations, oversight and of course, more taxes.

Since so few Americans know about this, you may want to pass this E-Letter along liberally.

LATE NOTE: Fox News and The Washington Post report this morning that the Social Security Administration announced late yesterday that it is suspending efforts to collect on taxpayers’ debts to the government that are more than 10 years old – while the agency conducts a review. See link to story below. That’s a great thing, but we have to keep the pressure on!

”ALPHA ADVANTAGE” Webinar is Tomorrow at 2:00 PM Eastern

Halbert Wealth Management (HWM) is pleased to announce that our next webinar – “HWM Alpha Advantage” will be tomorrow, Wednesday, April 16th at 2:00 PM Eastern. The webinar will outline this new professionally managed program that combines multiple trading strategies with low correlation into a single investment account.

This informative presentation will explain how the strategies used in Alpha Advantage work exceptionally well together, and how combining them in a portfolio can potentially increase returns significantly and, at the same time, reduce the overall risk of the portfolio.

Attendees to the webinar will see the impressive net annualized hypothetical return from August 2005 to February 2014 which would have been 23.4%, versus only 7.1% for the S&P 500 Index during the same period. Just as impressive, the worst drawdown (measured as of month-end) would have been only -13.8%, compared to -50.9% for the S&P 500.

(As always, past performance is no guarantee of future results. Be sure to read Important Disclosures below, including limitations on using hypothetical numbers and limitations on comparisons to Indexes before making a decision to invest.)

We are excited to present this webinar and discuss this combination of strategies that quite simply blew our doors off!

Click here to get more detailed performance information.

Cliff Montgomery, CFA and President of Scotia Partners, LLC, will be our featured speaker for the webinar on April 16. His company is the Trading Manager for HWM Alpha Advantage. We have recommended Cliff and his company for many years.

Alpha Advantage is the hottest strategy combination I have seen in years. So I hope you can join us tomorrow to learn more about this program and how it works so well. There will be a Q&A period following the live webinar when you can submit any questions you may have.

So I hope you will make plans to join us tomorrow at 2:00 PM Eastern. This is one webinar you don’t want to miss. CLICK HERE to register.

Very best regards,

Gary D. Halbert


Breaking: Social Security suspends tax refund confiscation on debt over 10 years old

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IMPORTANT NOTES:  Halbert Wealth Management, Inc. (HWM) and Scotia Partners, Ltd. (SPL) are Investment Advisors registered with the SEC and/or their respective states.  Information in this report is taken from sources believed reliable but its accuracy cannot be guaranteed. Any opinions stated are intended as general observations, not specific or personal investment advice. Investments mentioned involve risk, and not all investments mentioned herein are appropriate for all investors.  HWM receives compensation from SPL in exchange for introducing client accounts.  For more information on HWM or SPL, please consult Form ADV Part 2, available at no charge upon request. Officers, employees, and affiliates of HWM may have investments managed by the Advisors discussed herein or others.

As a benchmark for comparison, the Standard & Poor’s 500 Stock Index (which includes dividends) was used.  It represents an unmanaged, passive buy-and-hold approach, and is designed to represent a specific market.  The volatility and investment characteristics of this Index may differ materially (more or less) from that of this trading program since it is an unmanaged Index which cannot be invested in directly.  The performance of the S & P 500 Stock Index is not meant to imply that investors should consider an investment in this trading program, which is actively managed, as comparable to an investment in the “blue chip” stocks that comprise the S & P 500 Stock Index.

The performance from inception through January 31, 2014 is hypothetical performance provided by SPL that was constructed using the actual performance numbers of multiple strategies used in this program, assuming approximately equal initial allocations to each strategy.  The amounts allocated to each strategy were rebalanced as the individual strategies move back into the cash position.  The hypothetical performance was reduced by the maximum annual fee of 2.5% on the first calendar day of each quarter.  From February 1, 2014 forward, the performance is from an actual account traded using the same strategy used in the hypothetical track record.  The maximum fee (2.5%) was deducted from the account, though not necessarily on the first calendar day of the quarter.

This combined performance illustration through January 31, 2013 is hypothetical and not model results, and has many inherent limitations.  The limitations include: 1) there are often large differences between hypothetical performance results and the actual trading results achieved by a particular program; 2) hypothetical performance results are prepared with the benefit of hindsight; 3) hypothetical results may not reflect the impact that market or economic factors might have had on the investment methods if actual money was invested; 4) hypothetical returns do not reflect the actual performance of an account and may not be indicative of the Advisors’ ability to manage money; 5) other clients may have had materially different investment results; and 6) these numbers should not be used to predict future performance.

The performance numbers provided by SPL have not been verified by HWM, and therefore HWM is not responsible for their accuracy. Statistics for “Worst Drawdown” are calculated as of month-end.  Drawdowns within a month may have been greater. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.  Mutual funds carry their own expenses which are outlined in the fund’s prospectus.  An account with any Advisor is not a bank account and is not guaranteed by FDIC or any other governmental agency.

When reviewing past performance records, it is important to note that different accounts, even though they are traded pursuant to the same strategy, can have varying results.  The reasons for this include: i) the period of time in which the accounts are active; ii) the timing of contributions and withdrawals; iii) the account size; iv) the minimum investment requirements and/or withdrawal restrictions; and v) the rate of brokerage commissions and transaction fees charged to an account. There can be no assurance that an account opened by any person will achieve performance returns similar to those provided herein for accounts traded pursuant to the Alpha Advantage program.

In addition, you should be aware that (i) the Alpha Advantage program is speculative and involves a high degree of risk; (ii) the Alpha Advantage program’s performance may be volatile; (iii) an investor could lose all or a substantial amount of his or her investment in the program; (iv) Scotia Partners, Ltd. will have trading authority over an investor’s account and the use of a single program could mean lack of diversification and consequently higher risk; and (v) the Alpha Advantage  program’s fees and expenses (if any) will reduce an investor’s trading profits, or increase any trading losses.

Returns illustrated are net of underlying mutual fund management fees, and other fund expenses such as 12b-1 fees.  Management fees are deducted quarterly, and are not accrued on a month-by-month basis.  They do not include the effect of annual IRA fees or mutual fund sales charges, if applicable. The program trades frequently and most gains or losses will be short-term in nature. No adjustment has been made for income tax liability. Consult your tax advisor.  “Annualized” returns take into account compounding of earnings over the course of an investment’s actual track record. Dividends and capital gains have been reinvested.  Money market funds are not bank accounts, do not carry deposit insurance, and do involve risk of loss.  The results shown are for a limited time period and may not be representative of the results that would be achieved over a full market cycle or in different economic and market environments.

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