How to Dispute a Social Security Overpayment and Tax Refund Offset

If Social Security concludes that you've received benefits -- disability or retirement -- to which you weren't entitled, you'll receive a notice and a demand for repayment from the agency. Social Security can bring the federal apparatus to bear on wayward beneficiaries, including a claim on your tax refund from the IRS. Fortunately, if you've received a notice of overpayment from Social Security, you have options to appeal the decision.

Grounds for Overpayment

Social Security has a variety grounds on which to state a claim of overpayment. The agency may claim that someone on disability exaggerated their medical problems, or earned over the "substantial gainful activity" limit while claiming or collecting disability. Supplemental Security Income claimants, who are means-tested, may have hidden assets or sources of income, or may have received financial help from relatives. Social Security may even claim fraud if someone else is using your Social Security number to collect benefits. To recover an overpayment, Social Security will seize your benefits or, after giving you 60 days notice, garnish your IRS tax refund.

Request for Reconsideration

If you want to dispute the claim of overpayment, file a Request for Reconsideration appeal within 60 days of the notice date. While the case is in appeals, Social Security will suspend collection action. You must explain why you believe Social Security is in error, and why your benefits should be reinstated if they have stopped. If your appeal is denied, you have the right to request a hearing on the matter before a Social Security judge. If that appeal is denied, then it's best to work out a repayment schedule with Social Security so that you can protect your income and assets.

Waiver of Overpayment Recovery

If you want to claim that the overpayment is not your fault, you can appeal the recovery by filing a Request for Waiver of Overpayment Recovery. There is no deadline for this appeal, which will also suspend collections until it is decided. This form allows you to request a reduced repayment, or a complete waiver, on the grounds that you were not at fault for the overpayment and that it would pose an undue financial hardship to you and your family.

Undue Hardship

Undue hardship, by Social Security's definition, means a financial situation in which you can't meet ordinary and necessary expenses. These include rent, food, clothing, insurance, taxes, medical expenses and utilities; to meet this guideline you must also have countable resources of less than $3,000. If the agency accepts your claim of undue hardship and believes you're acting in good faith, you'll be able to negotiate the overpayment recovery down to an amount that won't leave you destitute.