If you’re expecting a South Carolina tax refund and it doesn’t show up this year, it may have been intercepted by a little-known state program that can use all or part of the proceeds to pay off debt bills to a wide range of creditors.
The collection initiative at the SC Revenue Secretariat is called Debt Compensation. It redirects all or part of tens of thousands of reimbursements from residents each year.
And don’t expect a break just because of the global pandemic: the program was not suspended at any time during COVID-19.
“Under South Carolina law, the department must assist with debt collection once a complaining agency has submitted the debt to the department for collection under the debt compensation program,” said a spokesman. of DOR in a statement.
From the agency’s reports to the public, it is not possible to know exactly how many taxpayers saw their state refunds taken to pay a late bill, because someone could be owing money to several creditors enrolled in the program.
But it is possible to say that participants “fired” tax refunds about 400,000 times in fiscal 2018, according to the annual DOR report. This number represents about 17 percent of all South Carolina tax returns. Remember that an income tax return can, and often does, represent multiple individuals, because some are classified as dependents.
David Greene, a Greenville lawyer specializing in tax law, said it becomes more difficult to challenge a bill after it is sent to the state program for billing. The lender must send a letter to your debtor before this happens. It is better to avoid the problem at this point, Greene said, rather than waiting and possibly missing a tax refund check.
“You would probably get a better deal by paying it with the agency than by competing with DOR,” said Greene.
The Revenue Department also applies a $ 25 processing fee for each debt it collects. In fiscal year 2020, this surcharge brought $ 7.2 million to the state. An agency spokeswoman said these funds are used for “administrative costs, such as revenue collection, processing, installation costs and IT costs, such as software and hardware maintenance”.
Any organization with connections to the state or local government can use the program. Housing authorities, colleges and universities and even public services are registered.
The SC Association of Counties collects the most from any agency using the debt compensation program. The Columbia-based group, a private organization that lobbies on behalf of county governments, in turn passes on the money it recovers to creditors who hire for the service. They include hospitals, ambulance services, county agencies and more.
Hospitals have come to dominate the program, the Post and Courier reported in 2019, charging overdue medical bills mainly by qualifying as quasi-public entities.
Catch up Mary Katherine Wildeman at 843-607-4312. Follow her on Twitter @mkwildeman.