The Washington Post today reported on thousands of taxpayers being deprived of tax refunds to repay debts incurred by their parents decades ago. It cites the experience of Mary Grice of Takoma Park, Md., who is suing the Internal Revenue Service for laying claim to her refund without any record to substantiate her benefiting from a survivor benefit overpayment on her father’s social security account in 1977. Grice was one of five children who along with her father’s first wife received survivor benefits on the account. The other surviving children have not been targeted by IRS.
In recent years, the news has included stories of taxpayers whose refunds were offset to pay child support, or delinquent student loan debtors whose refunds were applied to their outstanding balances. Only since 2011 has IRS reached even further, grabbing up tax refunds to pay debts that were once considered time-barred and debts incurred by the taxpayer’s parents.
Are you at risk of receiving a dreaded IRS offset letter instead of a refund check based on a family member’s debt? Here’s what you need to know:
*In 2008, Congress included language removing the statute of limitations on debts owed the government in a farm bill. Under the authority of section 14219 of P.L. 100-246, IRS is authorized to enforce any debt outstanding on or after the passage of the law, provided the offset is not otherwise barred by statute for the particular type of debt.
*IRS began an aggressive campaign to collect on old debts in about 2011, according to the Washington Post.
*The farm bill does not grant IRS authority to offset refunds for debts owed by family members; the cases that have made the news involved social security survivor’s benefits, at least putatively paid in part for the benefit of the taxpayer whose refund was offset.
*Social Security Administration record-keeping deficiencies have frustrated some alleged debtors into foregoing any challenge to the confiscation, the Post explained.
*Taxpayers who challenge the IRS offset may be able to get their money back. The absence of records proving the debts actually belong to the party subject to offset can lead to reversal, as happened with Alice Palatnick. NBC 4 New York described how Alice Palatnick, originally dinged for a 44-year-old debt ultimately got her $3,764 returned to her when its I-Team investigated.
*Grice’s attorney, Robert Vogel, questions the legality of the underlying legislation being interpreted to reinstate debts already time-barred when the legislation passed.
Manhattan tax attorney John Genova told NBC4 New York regardless of the statute of limitations issue, a taxpayer is entitled to notice, an opportunity to dispute a debt, and the opportunity to pay a debt over time.