Social Security stops trying to collect on old debts by seizing tax refunds
April 15 2014
By: Marc Fisher
The Social Security Administration announced Monday that it will immediately cease efforts to collect on taxpayers’ debts to the government that are more than 10 years old.
The action comes after The Washington Post reported that the government was seizing state and federal tax refunds that were on their way to about 400,000 Americans who had relatives who owed money to the Social Security agency. In many cases, the people whose refunds were intercepted had never heard of any debt, and the debts dated as far back as the middle of the past century.
“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,” the acting Social Security commissioner, Carolyn Colvin, said in a statement.
Colvin said anyone who has received Social Security or Supplemental Security Income benefits and “believes they have been incorrectly assessed with an overpayment” should contact the agency and “seek options to resolve the overpayment.”
The effort to collect on old debts began with a single line in the 2008 farm bill that lifted the statute of limitations on debts to the government that are more than 10 years old. The Treasury Department then set up rules that allowed the government to settle such debts by intercepting taxpayers’ refunds. The department has collected about $2 billion in intercepted tax refunds this year, $75 million of that on debts delinquent for more than 10 years.
Mary Grice, a federal worker who lives in Takoma Park, Md., never got the refunds she was expecting to see in her mailbox this year. The government seized her checks because of a $2,996 debt that was supposedly incurred under her father’s Social Security number. Her father died in 1960, when she was 4, and her mother received survivors’ benefits thereafter.
But 37 years passed between when the Social Security agency says it overpaid someone in the Grice family and when Mary Grice’s refund was taken. She was unable to find out from the agency exactly who received the overpayment — her mother or perhaps her father’s first wife, both of whom are no longer living.
The suspension of the collection effort is “the right thing to do,” said Grice’s attorney, Robert Vogel. “It’s a first step. The next thing they have to do is stop collecting debts from children under any circumstances.”
Vogel filed suit in federal court in Greenbelt, Md., last week, alleging that the government denied Grice due process by failing to give her notice of the debt and by taking the money from her, even though she was not receiving government benefits at the time the debt was incurred.
Vogel and several members of Congress argued that the government should not be holding children accountable for the financial acts of their parents. The Federal Trade Commission, on its Web site, advises Americans that “family members typically are not obligated to pay the debts of a deceased relative from their own assets.”
After The Post’s article was published late last week, many hundreds of taxpayers whose refunds had been intercepted came forward and complained to members of Congress that they had been given no notice of the debts and that the government had not explained why they were being held responsible for debts that their deceased parents may have incurred.
In a note Social Security officials sent to several members of Congress on Monday, the agency said, “We will be reexamining our responsibilities under current law for such referrals and will be notifying you of our conclusions upon completion of the thorough review.”
In a letter to Treasury Secretary Jack Lew on Monday, Sen. Charles E. Grassley (R-Iowa) said that government agencies were apparently “not properly notifying individuals or allowing them to inspect records of the debt they supposedly owe, which are violations of the law.”
Grassley said that although Congress did authorize the government to seek payment on old debts, the law “says nothing about allowing the government to offset payments from an individual to pay debts not in his or her name. It is unclear where the government has that authority.”
The senator said that Congress created a rigorous system to ensure that debt collection is handled transparently but that “it appears that agencies are abusing this system.”
“From today it can only take one court hearing, orders can be served electronically, and the fee for changing an order has been waived. It’s much better and simpler for everyone concerned,” says Mr Borrows.
The District Courts Amendment Act is part of a comprehensive package of legislative changes arising out of the Courts and Criminal Matters Bill which was introduced to improve the processes for collecting fines and enforcing civil debt.
Previously introduced initiatives include: allowing driver licences to be suspended for unpaid traffic fines, giving credit agencies the power to check for outstanding fines before deciding whether or not to lend, and allowing fines to be disputed online.
“Those changes have been effective in helping our courts improve the collection of fines,” Mr Borrows says.
“It’s estimated that, between them, they’ve helped us collect more than $50 million in fines in the three years since the Bill was introduced,” says Mr Borrows.