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Social Security Halts Tax-Refund Grab to Recover Old Debts

U.S. Treasury

Update: The Social Security Administration says it will immediately stop collecting old debts by grabbing taxpayers' refunds.

In a statement, Carolyn W. Colvin, the acting commissioner of the agency, says:
"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."


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The standard financial advice is to reduce your tax withholding enough so that you don't get a refund each spring - or, in other words, provide an interest-free loan to Uncle Sam.

Here's another reason: The government might intercept the money to pay a long-forgotten or even unknown debt incurred by your parents.

The Washington Post reports this is happening to adult children who discovered that tax refunds are being confiscated by the U.S. government to recoup overpayments of Social Security survivor benefits to their parents decades ago. In one case, a 58-year-old Maryland woman's refunds were used to recover what Social Security claims was an overpayment in survivor benefits after her father died - when she was 4. Social Security told the woman she was liable for the $2,996 in overpayments her mother received to support the family. The agency went after her because she was the oldest child, the Post says.

More troubling, the agency doesn't have records detailing these overpayments because the original documents have been thrown out. The woman is suing the agency.

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All this was made possible by a line inserted in a farm bill three years ago that lifted the statute of limitations on how far back the government can go to collect on old debts, according to the Post.

And more of this refund grabbing is likely to go on. The Post says 400,000 taxpayers owe $714 million to Social Security on debt that's more than a decade old. Other agencies besides Social Security also are using this tactic to collect old debts, the paper said.

Photo: DNY59/iStock


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