Feds Snatch Kids’ Tax Refunds to Pay Off Parents’ Old Debts

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Uncle Sam is intercepting some taxpayers’ tax refund checks to collect on Social Security overpayments made to their parents -- even decades ago.

If the government finds that your parent was overpaid for Social Security survivor benefits, you could be on the hook to pay it back. That’s right. Even if the debt is decades old, Uncle Sam could be coming after you.

A Maryland woman named Mary Grice found out the hard way that someone in her family was allegedly overpaid by Social Security in 1977. According to The Washington Post, the government confiscated both her federal and state tax refund checks to settle the old debt of $2,996.

“It was a shock,” said 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.”

Grice’s father died in 1960, and his five children and his first wife received Social Security survivor benefits as a result. One of those recipients — it’s unknown which one — was overpaid in 1977. According to the rules, Social Security goes to the oldest of the living beneficiaries for the money, then works its way to the youngest until the debt is paid. The Post said:

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 Social Security 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.

The Post says the feds have seized $75 million in tax refunds this year to settle debts owed to the government that are more than 10 years old. It added, “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.”

Just so we’re clear on how this works: The government screws up and overpays Social Security survivor benefits. Then later (sometimes decades later) the government wants to right its past mistakes, and it comes after the children to do so.

CNBC said there’s a clear message here, and it’s disturbing.

Remember that the people who benefited from these alleged Social Security payments have not committed any crime — that’s why the government doesn’t need to provide any proof or real documentation. It’s more likely that the SSA simply screwed up and expects the descendants of its accidental beneficiaries to pay up. And again, the money comes out first before you can protest and find out why.

Not surprisingly, there’s reluctance on the government agencies’ part to step up and take credit for reopening the old cases, the Post said. Social Security says it wasn’t its idea – go ask Treasury. Not us, says the Treasury Department – check with Congress. Congress claims it was likely a move pushed by the bureaucracy.

Regardless of which agency is behind the seizure of tax refunds to pay off old debts, it’s happening. Did your family receive survivor benefits when you were a child? If there’s even a chance there was a mistake made, you might want to review and make potential revisions to your W-4 to make sure you don’t get a tax refund the government could seize.

What do you think of Uncle Sam targeting kids for their parents’ old debts? Share your comments below or on our Facebook page.

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