Tax Refund Take Back: Little-Known Government Program Allows Tax Board to Intercept Refunds

Expecting a tax refund? Cities like LA might try to nab it from you

Jose Sanchez was counting on his tax refund.

"That could be a week of groceries," explained Sanchez. "That's a car payment."

But instead of his full refund, Sanchez received a letter from the California Franchise Tax Board informing him that the Los Angeles Department of Transportation (LADOT) had seized $241 from his check. The letter claimed that he owed them money.

"It's like, why are you going after me? I didn't do anything wrong," said Sanchez.

LADOT told Sanchez he had an unpaid parking ticket on his record. So the department used a little-known government program, called the "Interagency Intercept Collection Program," that allows local agencies to seize people's tax refunds for delinquent debts.

They got Jose Sanchez's money, but it turned out the City of Los Angeles actually had the wrong Sanchez.

When Sanchez called the LADOT for an explanation, the customer service representative said the parking ticket was for a Volkswagen. But he doesn't own a Volkswagen. And he doesn't live in the City of Los Angeles. A Fontana resident, Sanchez said he hasn't been to Los Angeles in years.

"I feel like it's been stolen from me," said Sanchez. "They don't care. That's the way I feel, they don't care."

How does this happen? Agencies like the LADOT can ask the California Franchise Tax Board to intercept your income tax refund if they think you owe them money. It can be used for a variety of debts including property taxes, fines, parking tickets and court-order payments.

But for the program to work correctly, the Franchise Tax Board needs to match the debt to the correct person. That didn't happen in Sanchez's case.

When the NBC4 I-Team questioned Wayne Garcia, head of the LADOT's Parking Violations Bureau, about the error, he acknowledged the mistake.

"We apologized to Mr. Sanchez," said Garcia. "And these errors to be honest with you they rarely happen."

But is that true? When Sanchez asked the LADOT's own customer service representative if his case was an error, she told him that, "It happens all the time sir, yes." And, the I-Team has heard from others who've had their refunds wrongly intercepted by LADOT.

Garcia said his agency accidently gave the Franchise Tax Board the social security number of the wrong Jose Sanchez. The unpaid parking ticket belonged to a different driver with the same name.

NBC4 asked LADOT if there should be better checks and balances to make sure these mistakes don't happen. Garcia said that his agency is "trying to figure out how that might work."

Los Angeles isn't the only city taking the wrong people's tax refunds.

Michael Gardner of Sacramento planned on taking his wife to Disneyland with his tax refund. It's an annual tradition for the couple. But the City of Inglewood seized a portion of his refund for an unpaid parking ticket.

"I've never been to Inglewood," said Gardner. "I did nothing wrong but yet I was accused."

In an email to the I-Team, the City of Inglewood admitted that "an incorrect license plate was entered into the system." They say these mistakes are rare and quickly resolved. But Gardner had to reach out to the media before he got his money back.

"It's just wrong to take money from somebody without knowing for sure who you are taking it from," said Gardner.

Wayne Garcia at LADOT agreed.

"If I was in his shoes, no, that's not really fair. I would've been upset as well," said Garcia.

LADOT originally told Sanchez that it could take up to eight months to refund his money. But after the I-Team questioned LADOT, Sanchez received a refund within three weeks.

"They need to develop a better system of not finding the wrong people," said Sanchez.

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