Your stimulus check could have a bite taken out of it

By Jaedda Armstrong

John Harris was looking forward to the extra cash from his federal economic stimulus check. He was going to use it to have a sty removed from his wife's eye, and to get a few personal things for himself.

But a few days before the check arrived, Harris received a letter from the Internal Revenue Service, telling him that about $482 of his $600 check would be taken to pay a debt.

Harris almost fainted.

His story is not unique. Federal officials have collected about $1.27 billion in delinquent debts by seizing payments due to taxpayers this year, said Melody Barrett, spokeswoman for the U.S. Treasury Department's Financial Management Service.

That's out of $70.8 billion sent so far, or less than 2 percent of the total.

The stimulus payments are intended to help the gloomy economy by putting cash in people's pockets. But those who owe child support, federal non-tax debts such as student loans, or delinquent state taxes may have their stimulus payments spent for them.

More than half the funds taken has been for delinquent child support, Barrett said, and that money is going to families and children.

As of late June, the commonwealth's Division of Child Support Enforcement has intercepted $5.8 million from economic stimulus payments on behalf of Virginia's children, said Virginia Department of Social Services spokeswoman Marianne McGhee. McGhee said that number could reach $20 million.

The stimulus payments are as much as $600 for single taxpayers and $1,200 for most joint tax filers, with $300 for each additional dependent child younger than 17. The IRS has been sending stimulus checks since late April and will continue until mid-July. About 130 million households will receive stimulus payments, the IRS said.

Harris, of Norfolk, said his debt was from food stamps his family received during Hurricane Isabel in 2003. His electricity was off for eight days and his family needed food, Harris said. He took advantage of the Disaster Food Stamp Program, a pilot program administered by the city's Department of Human Services to aid people hit hard by the storm.

"We were running around trying to find a bologna sandwich like everybody else," Harris said. "Why should I pay for something that was supposed to be helping people out?"

The U.S. Department of Agriculture ordered audits of emergency assistance applications that came in after the hurricane damaged homes in Hampton Roads.

The IRS informed Harris he owed money to the city's Department of Human Services. When he called them, he was told he had to reimburse the city for food stamps. They told him he didn't qualify for the stamps.

Federal agencies must notify taxpayers of overdue debts. Under federal law, debts are turned over to the Treasury's Financial Management Service after 180 days. Stimulus payments, Barrett said, like other federal payments, can be seized as required by the law.

Harris said the stimulus payment had been like a blessing because no one expected it.

"People were depending on that money; it's not much but it's supposed to be for the people. You're giving us money just so you can take it away."

After numerous calls to the city, Harris was told there was nothing he could do. He says he was told the government is always right.

Jerry Crain, a certified public accountant with Craver, Green and Co. in Norfolk, disagrees.

"The government does make mistakes," Crain said.

But, he said, the government has the power to withhold any money that's owed to it.

"If you owe the government money, they can garnish it from any refund," Crain said. "It doesn't do any good to ignore notices. It would be better... to deal with it immediately."

Jaedda Armstrong, (757) 446-2346, jaedda.armstrong@pilotonline.com