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Tax Refunds Exempt from Collection for Old Social Security Debts

July 27, 2017

In a policy change that will affect tens of thousands of Social Security recipients, the Social Security Administration (SSA) pledged to stop collecting old overpayments from federal tax refunds. Several lawsuits, including ones in Maryland and the District of Columbia, highlighted the unfairness of SSA’s practice of collecting old overpayments, some arising from payments to deceased parents.

The plaintiffs in the D.C. lawsuit, Heard et al. vs. SSA, brought by the Legal Aid Society of the District of Columbia, claimed that their tax refunds were unlawfully seized; that this confiscation occurred with no notice, explanation, or evidence of indebtedness; and that they were provided with no adequate means to challenge that seizure, all in violation of various federal laws as well as due process requirements under the U.S. Constitution. That case is presently before the D.C. Circuit. Another case alleging similar claims was filed in the U.S. District Court for the District of Maryland (Hart v. Colvin) and is currently pending before the U.S. Court of Appeals for the Fourth Circuit.

In an Emergency Message issued May 12, 2017 (EM-17014 SEN), SSA advised its staff that no Social Security debts with a delinquency date of May 2002 or earlier would be referred to the Treasury Offset Program (TOP) for collection. SSA also signaled that taxpayers whose refunds were taken should be eligible for reimbursement with more specific instruction regarding such possible compensation to follow. The reimbursement could affect about 65,000 recipients who have had a total of approximately $56 million in tax refunds seized under the practices challenged in the lawsuits.

While advocates welcomed SSA’s efforts in response to the ongoing litigation, the policy change alone does not fully address the issues raised by Legal Aid’s lawsuit. The to-be-announced refund process remains contingent and uncertain. And even after this announcement, SSA continues to seek the collection of overpayments, including overpayments that became delinquent decades ago, through all possible means other than the Tax Offset Program (TOP). The SSA will continue to be able to pursue such collections even if it lacks sufficient evidence to demonstrate that the alleged overpayment actually happened

Individuals who believe their tax refunds were seized based on alleged Social Security overpayments that became delinquent before May 19, 2002, or who have been asked to repay an alleged overpayment that the SSA cannot document, should seek legal assistance. SSA’s instructions regarding refunds of collections of old debts have yet to be finalized. We will provide updated information when it becomes available. SSA’s EM is available as DAP #583.


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