Could the IRS's Error force Financial hardship?
The IRS made a big error in one of the worst states to make an error of this kind. The IRS double paid refunds to 66,700 Louisiana taxpayers which is the third poorest state in the US. The mistake was a 26 million dollar error. After catching the error, the IRS decided to fix it by withdrawing the amount from taxpayers bank account. Mistakes happen and the IRS is not immune to them. However, it is how they go about fixing the problem that is important...and there might not be a good answer.
The potential problems are endless. Most people who get tax refunds have that money spent already. Most people were not prepared for a reduction in their tax refunds and it was a surprise. Thus, getting an increased payment might look like a little more than they were actually expecting. Thus they spend it right away. The IRS goes to withdraw the error. The IRS withdraws the money and corrects the error after the money is spent. Now, the taxpayers bank account does not have money to completely pay the bills or worst, the taxpayer gets overdrawn because of it and they owe the IRS money.
This isn't a prosperous state where taxpayers probably won't miss the error. Then again, there are a large percentage of Americans in every state living paycheck to paycheck.
I wonder if the IRS thought through the impact of their mistake? Obviously, they cant just give the taxpayer the money. What's worse is if the IRS does not successfully withdraw the money from the taxpayers bank account, they will just send them a letter that they now owe the IRS money. What if they don't respond or can't pay the money back? Do they go into the IRS collections process along with penalties and interest on the money?...Probably.
Out of all of the entities, you don't want to owe money to the IRS would be top of that list.
I don't pretend to know the solution to the correction of this error. I would just hope the IRS would show some grace to the financial hardships their error just likely caused.