Prior to 2008, the law stated that the Social Security Administration and an assortment of other federal agencies could utilize a program run by the Treasury Department to confiscate federal payments -- i.e., tax refunds -- in satisfaction of outstanding debts that weren't more than 10 years old.
In 2008, however, the law was amended such that these agencies could seek to seize the tax refunds of those Americans with debts over 10 years old.
This amendment proved highly beneficial to the SSA, which identified nearly 400,000 people owing the agency $714 million and, to date, has recovered $55 million from thousands of benefit recipients.
Not surprisingly, this seizure of tax refunds to resolve debts several decades old has drawn severe criticism from both benefit recipients and federal lawmakers, including Sens. Barbara Boxer (D-California) and Barbara Mikulski (D-Maryland) who called it "entirely unjust."
Here the criticism stems from the fact that many people are now being forced to sacrifice their much-needed tax refunds to cover overpayments made to their parents or guardians on their behalf when they were only children and otherwise had no knowledge of anything related to Social Security benefits.
To illustrate, if a parent with a minor child dies, their surviving son or daughter may be entitled to survivor's benefits, which are generally distributed to the surviving parent or guardian. Under the current collection program, if any overpayments in survivor's benefits were made while the minor child was growing up, the SSA is now free to come after them years later as an adult.
Fortunately, the SSA seems to understand and appreciate the growing outrage concerning these collection tactics, with Acting Social Security Commissioner Carolyn Colvin announcing this past Monday that the collection program was being temporarily suspended.
"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," she said.
To that end, SSA officials indicated that debt collection would not be pursued against those parties who are without fault and for whom a seizure of tax refunds would deprive them "of income needed for ordinary living expenses or would be unfair for another reason."
It is certainly encouraging to see the SSA alter their position on this program. Did you or anyone you know encounter any difficulties in this regard or have a tax refund seized?
Source: U.S. News & World Report, "After complaints, Social Security stops having tax refunds seized to settle decade-old debts," Stephen Ohlemacher, April 14, 2014