Taxpayers take Social Security to court

A group of D.C. residents are going to court against the Social Security Administration over tax refunds held back to pay off decades-old overpaid benefits.

The lawsuit, filed Wednesday in a federal district court, could grow into a class action suit if enough plaintiffs emerge — and the attorneys behind the suit say as many as 400,000 Americans and $75 million in refunds could be involved.

{mosads}The legal action marks the latest in a long-running feud between taxpayers and the Social Security Administration, after that government agency was given an expanded ability to recoup old money owed. And in many cases, the taxpayers losing their refunds are paying the price for improper benefits given out on behalf of relatives.

The suit alleges that three D.C. residents were not notified that their refunds would be withheld to pay off old debt, and only found out why those payments were withheld when they sought out that information.

The case was brought by the Legal Aid Society of the District of Columbia and the firm McKenna Long & Aldridge.

“This case challenges outrageous government actions that have taken taxpayers’ refunds without prior notice and an opportunity to respond,” said Daniel Jarcho, a Washington-based partner at McKenna Long. “Due process principles and the Social Security Administration’s own regulations prevent the government from appropriating tax refunds and only notifying taxpayers after the money is gone.”

In one example, Tina Heard received Social Security benefits for several years as a child after her mother died. But she said those payments stopped over 30 years ago.

In April, the Washington Post reported that the government had begun seizing state and federal tax refunds in an effort to recoup money owed to Social Security by nearly 400,000 Americans. The initiative came about after a provision included in the 2008 farm bill did away with a 10-year statute of limitations on recouping unpaid debts to the government.

The Treasury Department was already reducing or eliminating tax refund payments to offset other government debts owed, but that change to the law opened the doors to hunting down tabs built decades ago.

The Social Security Administration was already facing legal action from other taxpayers that saw their refunds shelved to pay off ancient debts. The policy shift also caught the attention of lawmakers, including some who sought to halt the practice.

Shortly after the Post published its story, acting Social Security Commissioner Carolyn Colvin ordered an immediate halt to referring owed Social Security debts over 10 years old to the Treasury Department to offset tax refunds.

The practice was halted “pending a thorough review of our responsibility and discretion under the current law to refer debt to the Treasury Department.”

A Social Security representative did not respond to a request for comment Wednesday.