The IRS May Be a Bit Out of Control

No one likes the IRS, but this appalling and infuriating story is likely to make you like that agency even less. They’re now withholding tax refund checks from people whose long-dead parents had federal debts from decades ago, and we’re talking hundreds of millions of dollars.

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. Grice had no idea that Uncle Sam had seized her money until some days later, when she got a letter saying that her refund had gone to satisfy an old debt to the government — a very old debt.

When 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 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 who are expecting refunds this month are instead getting letters like the one 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…

Since the drive to collect on very old debts began in 2011, the Treasury Department has collected $424 million in debts that were more than 10 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.

Grice has filed a lawsuit over it, which I certainly hope she wins.

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  • Alverant

    “400,000 taxpayers who collectively owe $714 million”

    That’s less than $2000 apiece on average. What do you want to bet they’re not doing it on those who owe millions and can afford to pay.

  • Pierce R. Butler

    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…

    Tucked into the farm bill by whom??? This sounds to me like the IRS is a bit under control – of some group which wants to make Obama/the Democrats look bad in 2014.

  • John Pieret

    It doesn’t seem that the IRS is to blame in this. Most of these old debts are “owed” to Social Security and the most the IRS is doing is turning taxpayer refunds over to other Federal agencies that have a “colorable” claim to collect the “debts.”

    Alverant @ 1:

    That’s less than $2000 apiece on average.

    That’s the beauty of this for the Federal government. Who’s going to spend thousands or tens of thousands of dollars to get back less than the legal costs?

  • anbheal

    I would actually support the notion if it were restricted to ONLY those who had qualified for the estate tax. Let’s say Stratton Briggs Wigglesworth IV paid $4 million in taxes on his parents $15 million estate, the poor dear only allowed to inherit $11 million of unearned booty, because, well, he’s from the producing class, of trust fund brats in sportscars with cocaine. It turns out that the parents and their lawyers had been duping the government for some time and not reporting income, on which they should have paid a few million dollars over the course of the 1990s. I have NO PROBLEM WHATSOEVER with the IRS going after the kids who reaped the windfall.

    The anecdote the article chose to highlight is of course unjust. But is it representative? If someone cheats on their taxes in order to leave their kids more unearned undeserved loot, do we really want to say that the government shouldn’t go after it? And by we, I don’t mean Libertarian assholes who think the 16th Amendment is the ultimate form of oppression, I mean people interested in a more egalitarian distribution of wealth.

    If the hunt is indexed to the size of the estate, I actually ADMIRE the principle. Don’t let the rich loot the commonweal on behalf of their brats!

  • Sally Stearns

    Pierce, I’d say this is actually something that received bipartisan support, I know dems have been wanting to go aggressively after loopholes for a while and republicans have been happy to agree.

    Now, normally, I know the IRS has to go after any money it overpays because if it doesn’t, someone can use that as a precedent to be corrupt and hand out free money, but for a debt as old as this, there’s got to be some sort of jubilee clause.

  • regexp

    Isn’t this has less to do with the IRS and more to do with an change in regulation passed by congress?

  • Scott Hanley

    Question for the legal scholars: if the original statute of limitations has expired and a new law passed retroactively rescinding that expiration — is that not considered ex post facto and hence unconstitutional?

  • justawriter

    The “program” has been suspended, at least for the moment …

    “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.

  • Blondin

    Isn’t that what probate is for? I thought there were time limits on filing objections or claims against estates.

  • Pierce R. Butler

    Sally Stearns @ # 5: … this is actually something that received bipartisan support…

    Somehow, measures that make the Democrats look bad usually receive bipartisan support.

  • Eric Ressner

    I couldn’t find the extended statute of limitations in the Farm Bill linked in the WaPo story. But there was probably no need for it, since there’s this:

    Thou shalt not bow down thyself unto them [graven idols], nor serve them: for I the LORD thy God am a jealous God, visiting the iniquity of the fathers upon the children unto the third and fourth generation of them that hate me….

    from Deuteronomy 5:9. So if the IRS doesn’t recover the overpayment from Mary Grice, they’ll just go after her great-grandchildren for it. Apparently, benefits from the Social Security Administration are a form of graven idols now, and accepting benefits is akin to bowing down unto them.

    Sure … I can see that.

  • EnlightenmentLiberal

    Isn’t there some legal idea / longheld tradition that you are not automatically responsible for the actions – or debts – of your parents? The debts of your parents should be as binding on you as the debt’s of a random stranger.

    If so, what the fuck is going on here?

  • Pierce R. Butler

    Enlightenment Liberal @ # 12: Isn’t there some legal idea / longheld tradition that you are not automatically responsible for the actions – or debts – of your parents?

    Creditors usually get first dibs on anything you might inherit, or anything transferred to your name in (as the court may decide) an attempt to evade debts or estate taxes. You can usually hang on to what you got on your own, but you’ll never get the house without the mortgage.

  • lynxreign

    And the best part of all this is that it is completely unnecessary. This kind of aggressive revenue pursuit comes from a lack of understanding of a fiat currency and the way money works., The federal government has no revenue, it issues currency. The money it collects in taxes is a leveler, not an income stream.

  • freehand

    lynxreign, sounds like cargo cult economics.

  • lynxreign


    Nope, it is called Modern Monetary Theory. It is one of the few I’ve seen that understands we’ve been on a fiat currency for 40 years. I thought it sounded like wishful thinking when I first read about it too, but I’ve done a lot of research and it is far more grounded in reality and history than the other major economic schools. The only other one that makes any sense at all is Keynesianism and that was developed while we were still on the gold standard. Modern Monetary Theory agrees with Keynesianism in a lot of respects, but it more current.

  • EnlightenmentLiberal

    @Pierce R. Butler

    Sure, but I don’t see the IRS taxing inheritance here. I see the IRS saying that children are liable for the debts of the parents, which is absurd.

    Maybe I misunderstand the situation. Maybe they’re trying to apply back taxes to inheritance? Maybe some obscure circumlocution whereby they say that the parents owed the IRS money, and the children inherited money, and thus the debt was passed on to child? I suppose that’s borderline legal. Did the IRS bother to check how much money – if any – these particular children inherited from their parents?