U.S. seizing tax refunds to settle some very old debts

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WASHINGTON -- A few weeks ago, with no notice, the U.S. government intercepted Mary Grice's tax refunds from both the IRS and the state of Maryland. Ms. Grice had no idea that Uncle Sam had seized her money until some days later, when she got a letter saying her refund had gone to satisfy an old debt to the government -- a very old debt.

When Ms. Grice was 4, 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 that 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.

Across the nation, hundreds of thousands of taxpayers expecting refunds this month are instead getting letters like the one Ms. Grice got, informing them that because of a debt they never knew about -- often a debt incurred by their parents -- the government has confiscated their check.

The Treasury Department has intercepted $1.9 billion in tax refunds already this year -- $75 million of that on debts delinquent for more than 10 years, said 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 farm bill lifting the 10-year statute of limitations on old debts to Uncle Sam.

No one seems eager to take credit for reopening all these long-closed cases. A Social Security spokesman says the agency didn't seek the change; ask Treasury. Treasury says it wasn't us; try Congress. Congressional staffers say the request probably came from the bureaucracy.

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."

Since the drive to collect on very old debts began in 2011, the Treasury Department has collected $424 million in debts that were 10-plus years old. Those debts were owed to many federal agencies, but the one that has many Americans howling this tax season is the Social Security Administration, which has found 400,000 taxpayers who collectively owe $714 million on debts more than 10 years old. The agency expects to have begun proceedings against all of those people by this summer.

"It was a shock," said Ms. 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."

Ms. Grice filed suit against the Social Security Administration in federal court in Greenbelt, Md., this week, 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.

Social Security officials told Ms. Grice that six people -- Ms. Grice, her four siblings and her father's ex-wife, whom she never knew -- had received 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 sibling 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 Treasury officials say that if children indirectly received assistance from public dollars paid to a parent, the children's money can be taken, no matter how long ago any overpayment occurred.


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