Update: At noon on Monday, April 14, Acting Commissioner of Social Security Carolyn W. Colvin issued the following statement:
I have directed an immediate halt to further referrals under the Treasury Offset Program to recover debts owed to the agency that are 10 years old and older pending a thorough review of our responsibility and discretion under the current law to refer debt to the Treasury Department.
If any Social Security or Supplemental Security Income beneficiary believes they have been incorrectly assessed with an overpayment under this program, I encourage them to request an explanation or seek options to resolve the overpayment.
Can the government confiscate your tax refund for payments made in error decades ago to your parents?
That's apparently what's happening, according to an article published Thursday in The Washington Post, which reported that the Treasury Department has intercepted nearly $2 billion in tax refunds so far this year, $75 million of it for debts that were more than 10 years old. Meanwhile, the Social Security Administration is going after $714 million worth of old debts from 400,000 taxpayers.
"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 spokeswoman Dorothy Clark told the Post.
The efforts to collect on old debts stem from a one-line insertion in a farm bill that lifts the 10-year statute of limitations on debt, according to the article, which profiles three individuals whose refund checks were debited or seized. The most egregious was the story of Mary Grice, whose mother received survivor benefits from Social Security in 1960 after her father died. Grice was 4 years old at the time. The WaPo article explains:
Now, Social Security claims it overpaid someone in the Grice family -- it's not sure who -- in 1977. After 37 years of silence, four years after Sadie Grice died, the government is coming after her daughter. Why the feds chose to take Mary's money, rather than her surviving siblings', is a mystery.
The taxpayers who are receiving truncated tax refund checks aren't even shown any records to prove the original overpayment. And efforts to get such evidence or even to obtain a receipt stating the debt has been paid have been in vain.
Grice isn't giving up. Her attorney, Robert Vogel, is fired up about taking the case pro bono. "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," Vogel told the Post.
Normally, children aren't responsible for paying debts incurred by their deceased parents when creditors come calling. But creditors generally don't have the authority to siphon anyone's tax refunds. Will Social Security checks be targeted next? Should we factor this possibility into our retirement planning?
If the government makes a mistake overpaying a beneficiary, it should write off the loss after a period of time has elapsed. Ten years seems reasonable. And it shouldn't be allowed to purloin the funds from the recipient's children.
Does this irk you?
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Barbara Whelehan is a co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters. It is available at Amazon, Barnes & Noble, iBookstore and other e-book retailers.