State program sends taxpayer refunds to pay bad bills

Is your tax refund being spent on bills you don't owe?

A decades old state program called “Setoff Debt” allows the South Carolina Department of Revenue to use tax refunds to settle outstanding bills to more than 100 government entities.

Agency Director, Rick Reames, said the program saves the state millions of dollars by reclaiming money owed instead of trying to collect it after it’s been refunded.

Under the law, the agency assumes all debts submitted are valid and that means some bills that may be in dispute by the taxpayer or, in some cases submitted in error, are deducted from legitimate tax refunds.

This year, Tammie Foster got burned twice.

In 2014, Tammie thought her visit to the Emergency Room at Pelham Medical Center in Greer, which is owned by Spartanburg Regional Hospital, was a matter of life and death.  She was frightened by chest pains and admitted for a battery of tests.

Luckily, she wasn’t in serious danger.

“I went to the E.R. was admitted for 24 hours for care, bunch of tests, and then released the next day,” Foster said.

Tammie works as a medical billing professional and has both insurance and a healthcare savings account.

Her records, later confirmed by the hospital, showed the bills were paid in full in October 2014.

Then, nearly 18 months later, a letter from the state got her blood boiling again.

“I was very angry.  I felt betrayed,” Foster said.

That letter from the SC Department of Revenue showed nearly $500 was withheld from Tammie’s tax refund.  Instead of getting her money back it, including a $25 service fee, was sent to Spartanburg Regional.

Reames said the agency was simply following the rules.

“Well it’s your money, but you also owe some of your money to another agency,” Reames said.

Under the Setoff Debt program, the money can not only be diverted for debts to state, city and county agencies but to county hospitals where the debts can be more confusing and often involve multiple parties.

“The Department of Revenue assumes the debt is valid,” Reames said.

After Tammie got her letter from the state, 7News contacted the hospital on her behalf.  A spokesperson confirmed the problem was the result of a “coding error” on her bill.

The hospital will refund her money along with the $25 fee.

In fact, they’ll do it twice.

This year the state, under the same program, sent nearly $400 of refund money belonging to Tammie’s mother-in-law to Spartanburg Regional after another “coding error”.

Just like with Tammie’s bill, that money should have gone directly to the taxpayer and the hospital plans to refund it.

Right now, the Department of Revenue said there are 114 agencies using the setoff debt program.

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