So the IRS now holds children responsible for parent's tax burden?

[grude]

They were children when Social Security overpaid their parents. Now the...

I’m trying to figure out exactly what this article is saying but, the IRS now enforces hereditary debt?!

[Alley_Dweller]

The specific cases being discussed in the article have nothing to do with the parent’s taxes. They involve Social Security survivor’s benefits: benefits paid to the surviving spouse and children of a Social Security recipient who has died.

The Social Security Administration (SSA) has alleged that survivor’s benefits were overpaid and is attempting to recover the overpaid benefits by placing holds on tax refunds. The IRS does not rule on the validity of the debt. Once an authorized agency has placed a hold, the IRS forwards the victim’s tax refund to the agency that placed the hold rather than to the taxpayer.

And here is where it gets murky: It is not clear how the SSA determined who was overpaid and who is responsible for repayment. Let me give an example, let’s say a man dies and leaves behind a wife and two minor children. Since the children are minors, their survivor’s benefits will be paid to their mother to use for the benefit of the children. The wife may also receive her own survivor’s benefits. Apparently, 30 or more years ago, the total payments made to the wife (including the children’s benefits) were excessive and the wife is now also gone, but the children still survive. The SSA is apparently going after the children to repay their excess benefits which were given to their mother. (I think that’s right.) And the SSA is not giving a clear accounting of whether it was the wife’s benefits or the children’s benefits that were overpaid and just going after whoever they can find.

You’ll note that diverting tax refunds is not new. The Education Department can put a hold on tax refunds if you are past due on your federal student loans. States can request a hold on your federal tax refund if you haven’t paid your child support. The IRS is just the middle man handling the money. The debt doesn’t necessarily involve underpaid taxes.

As far as holding children responsible for a parent’s tax debt, as the title of the post suggests, that can in fact happen if assets of the estate have been distributed to the children without paying a tax debt, but only up to the amount the children received from the estate (unless the children were somehow involved in tax fraud).

[Wendell_Wagner]

They just quit doing it:

http://ecreditdaily.com/2014/04/uproar-social-security-chief-halts-seizures-tax-refunds-pay-errors/

[Really_Not_All_That_Bright]

I’m seeing a pretty gigantic constitutional problem with ex post facto modification of a statute of limitations.

[Bricker]

@Really_Not_All_That_Bright

I’m seeing a pretty gigantic constitutional problem with ex post facto modification of a statute of limitations.

Can you elucidate?

The ex post facto clause itself applies only to criminal laws per Calder v. Bull.

What gigantic constitutional problem is in play here?

[Senegoid]

I swear, I saw another thread on this subject yesterday, but I can’t find it now.

In that thread, somebody complained of an even more disturbing aspect of this activity, which Alley Dweller tangentially alludes to in his post above:

That Social Security and IRS are doing this (well, were until yesterday apparently) with little-to-none documentation of their case. SSA just sends a message to IRS demanding some money from some taxpayer, and IRS carries it out, all without any niceties like proof, documentation, accounting records, etc. It’s left to the taxpayer to prove (if he can) that he doesn’t owe the money; the SSA and IRS have no burden of proof at all.

ETA: And, since these cases are settling alleged debts or overpayments from many years ago, it’s uncommon that the taxpayer himself would still have the necessary records.

[Really_Not_All_That_Bright]

@Bricker

Can you elucidate?

The ex post facto clause itself applies only to criminal laws per Calder v. Bull.

What gigantic constitutional problem is in play here?

The Ex Post Facto clause applies only to criminal laws, but even non-criminal ex post facto laws may work a denial of due process (particularly in the tax context):

This Court repeatedly has upheld retroactive tax legislation against a due process challenge. See, e.g., United States v. Hemme, 476 U.S. 558, 106 S.Ct. 2071, 90 L.Ed.2d 538 (1986); United States v. Darusmont, 449 U.S. 292, 101 S.Ct. 549, 66 L.Ed.2d 513 (1981); Welch v. Henry, 305 U.S. 134, 59 S.Ct. 121, 83 L.Ed. 87 (1938); United States **2022 v. Hudson, 299 U.S. 498, 57 S.Ct. 309, 81 L.Ed. 370 (1937); Milliken v. United States, 283 U.S. 15, 51 S.Ct. 324, 75 L.Ed. 809 (1931); Cooper v. United States, 280 U.S. 409, 50 S.Ct. 164, 74 L.Ed. 516 (1930). Some of its decisions have stated that the validity of a retroactive tax provision under the Due Process Clause depends upon whether “retroactive application is so harsh and oppressive as to transgress the constitutional limitation.” Welch v. Henry, 305 U.S., at 147, 59 S.Ct., at 126, quoted in United States v. Hemme, 476 U.S., at 568–569, 106 S.Ct., at 2077–2078. The “harsh and oppressive” formulation, however, “does not differ from the prohibition against arbitrary and irrational legislation” that applies generally to enactments in the sphere of economic policy. Pension Benefit Guaranty Corporation v. R.A. Gray & Co., 467 U.S. 717, 733, 104 S.Ct. 2709, 2719–2720, 81 L.Ed.2d 601 (1984). The due process standard to be applied to tax statutes with retroactive effect, therefore, is the same as that generally applicable to retroactive economic legislation:“Provided that the retroactive application of a statute is supported by a legitimate legislative purpose furthered *31 by rational means, judgments about the wisdom of such legislation remain within the exclusive province of the legislative and executive branches…“To be sure, … retroactive legislation does have to meet a burden not faced by legislation that has only future effects… ‘The retroactive aspects of legislation, as well as the prospective aspects, must meet the test of due process, and the justifications for the latter may not suffice for the former’… But that burden is met simply by showing that the retroactive application of the legislation is itself justified by a rational legislative purpose.” Id., at 729–730, 104 S.Ct., at 2718, quoting Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16–17, 96 S.Ct. 2882, 2893, 49 L.Ed.2d 752 (1976).

United States v. Carlton, 512 U.S. 26, 30-31 (1994)

Maybe “gigantic” was a bit much, though.

[Dewey_Finn]

@Senegoid

I swear, I saw another thread on this subject yesterday, but I can’t find it now.

Existing MPSIMS thread.

[Senegoid]

@Dewey_Finn

Existing MPSIMS thread.

Thanks. And here is the post I referred to, by Sailboat.

@Sailboat

By far the most disturbing part of the article is not that they’re trying to collect decades-old debts from children of deceased taxpayers, but that lack of records and their own uncertainty don’t seem to slow down the money grab:

< quotes from several cases cited here >

Multiple cases where the agency isn’t sure what happened and can’t prove it, but by God, wants some money.

If possible, it gets worse:

< more quotes >

If I’m reading that right, they seized more than they were owed and only returned the excess to which they were clearly not entitled under the pressure of public scrutiny. That would be infuriating.

(See Sailboat’s post for the cites I’ve elided here.)

ETA: Reported – to suggest that these two threads be merged.

[Emtar_KronJonDerSohn]

If anyone ever wants to take your tax refund -

1. Elect to apply your overpayment to next year’s tax liability.
2. Change your withholding status to “exempt.”.
3. A few months into the year meet with a tax professional to run a projection for that year’s liability.
4. Set your withholding at a level which will leave you owing a nominal amount.

Bonus points if you put the extra money you’re receiving as a result of claiming exempt into a retirement account, such as a 401k or Roth IRA. If whoever wants to Bogart your refund tries garnishing your accounts or suing you, these are untouchable. With a Roth IRA you can even withdraw your basis tax free at any time.