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


1. GovernmentTargets Children For Parents’ Decade-Old Debts

2.Social Security Administration Jumps on the Bandwagon

3.Regulators & Bureaucrats Desperate For More Revenue


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!

Very best regards,

Gary D. Halbert

© Halbert Wealth Management

© Halbert Wealth Management

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