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Inconspicuous IRS rule change could have overt consequences

Tax refund checks are one of the few pieces of mail that people actually enjoy receiving from the Internal Revenue Service. Families often budget the use of this money for special purposes. As such, one woman's dismay when she found out that nearly all of her refund had been garnished for an old debt is definitely understandable.

This past summer, a 62-year-old woman received an IRS notice, which she expected to be a $3,780 refund for the previous tax year. Instead, she found a $26 check and a notice explaining that the rest of her refund had been garnished for a debt she owed to the federal government.

Contacting a representative from the IRS wasn't a simple task, but after a number of calls, the woman was notified that her taxes were garnished this year for a debt dating back over four decades. Apparently, the government overpaid her Social Security survivor's benefits when her father died. At the time, she was just 19 years old.

It's widely believed that there is a statute of limitations on these kinds of debts, meaning that the government can take no collection actions after a certain number of years pass. However, a stealth provision in the 2008 federal farm bill eliminated the statute of limitations for most individual debts, which opened the door for the IRS to take action.

Perhaps the most disconcerting aspect of this case was that the IRS provided no evidence of the debt, but they still made an effort to collect it. It wasn't until a local news team conducted an investigation that the federal agency made an about face and returned the woman's refund in full.

As a teenager, the woman in this case had no idea a mistake was made. Yet a debt was created through no fault of her own and she was supposed to pay the consequences many years later. This case serves as an effective reminder that taxpayers have the right to appeal any discrepancies or claims made by the IRS about government debts.

Source: NBC New York, "I-Team: With Little-Known Rule Change, IRS Can Seize Your Refund," Ann Givens and Chris Glorioso, Nov. 14, 2013 

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