Abashed IRS Says It No Longer Will Seize Kids’ Savings

WASHINGTON —  Embarrassed by several well-publicized cases in which children’s savings were seized to pay their parents’ overdue taxes, the Internal Revenue Service on Tuesday announced new procedures designed to make sure it doesn’t happen again.

Under the new rules, the IRS said that it will not ask banks to levy on--or seize--any account with a balance under $100. In a levy case, banks will be asked first to temporarily freeze--rather than seize--any account that bears a name in addition to that of the delinquent taxpayer. The IRS will then take up to 21 days to try to determine the true owner; unless a bank receives additional instructions within that period, the account will be freed.

In the cases in which children’s accounts have been seized because of a tax debt by their parents, the accounts have carried the Social Security number of a parent, the IRS said. This prevented banks from determining the true owner.

“This is a situation in which we have been as frustrated as the taxpayers,” IRS Commissioner Lawrence B. Gibbs said in an interview. The new procedure, he added, “is in keeping with our initiative of trying to treat taxpayers like customers, making it easier for us to do a difficult job.

“Some of the stories indicate we are a large, uncaring, insensitive agency but, believe it or not . . . we haven’t done this intentionally,” he said. Under the old rules, the IRS simply told a bank it was attaching the rights to an account bearing the name or Social Security number of a delinquent taxpayer.

That’s what happened last month in the case of 12-year-old Garry D. Keffer of Chesapeake, Va. His parents had fallen behind in their taxes but had mailed a check for the final installment when the IRS directed a bank to seize their accounts. The boy’s $10.35 savings were swept up into the same net because his account bore his mother’s Social Security number.

The seventh-grader got the attention of the IRS by writing to President Reagan and sending a copy of the letter to his hometown newspaper. “I am now feeling distrustful of the United States government due to my financial devastation,” he wrote.

The IRS has since promised to return the boy’s money.

The agency acknowledged that there might be some slip-ups even with the new procedures and said it is still looking for other ways of making sure that only the accounts of delinquent taxpayers are seized.

In the meantime, the IRS recommended that any savings account belonging to a child carry that youngster’s Social Security number. The new tax law requires that by next April 15, any child over 4 years old who can be claimed as another person’s dependent must have a Social Security number.