IRS Social Security Garnishment or Levy: Details and Help
Can the IRS Garnish Social Security?
Generally, the government can garnish Social Security benefits described in Title II of the Social Security Act (OASDI). Section 6331 of the IRS code does not exempt Social Security from garnishment in order for the Internal Revenue Service to collect Federal taxes owed. The IRS may utilize the Federal Payment Levy Program or a manual levy. This includes Social Security disability program payments, retirement payments, and survivor payments. Contrastingly, lump sum death payments, children’s benefits, and supplemental Security Income (under title XVI) are exempt. You can read more about it here.
How Much Can the IRS Garnish of Social Security Benefits?
Generally, your Social Security Benefits will be garnished by 15% monthly under the Automated Federal Payment Levy Program (FPLP). By its name, this is part of the automated process. On the other hand, through a manual levy, the IRS is only restricted in the sense that they must take into account what income is necessary for living and has a set of acceptable living expenses based on the family size.
What Happens Before an IRS Social Security Levy?
Before the IRS garnishes your Social Security, you will be notified through a series of letters/notice to your last known address. If you file a return with a balance, about 60 days later you should receive CP-14, notifying you of a balance with a demand for payment. It will include any penalties and interest that has accrued. If you do not respond to CP-14, then CP-501, CP-503, and normally CP-90/CP-297 will follow respectively. In either case, if you do not act, then normally if your Social Security is in jeopardy of being levied you will receive CP 91 / CP298, Final Notice Before Levy on Social Security Benefits. At this point, you have 30 days from the date on the letter to resolve the issue before the IRS begins levying your social security benefits to pay back taxes (don’t call the Social Security Administration to resolve this issue).
Remember, there is a process that the IRS must follow before they levy your property. These three conditions have to be satisfied:
- The IRS was able to assess taxes owed, and sent you a notice demanding payment
- You failed to respond to the letter(s), pay your bill, or resolve unpaid taxes in another manner
- 30 days before your assets were levied, the IRS sent you a Final Notice of Intent to Levy
Once those three conditions have been met, the IRS is legally able to seize your property, and in this case, part of your Social Security Benefits.
Guidelines to Stop the IRS Garnishment of Social Security for Back Taxes
Your options to stopping or releasing IRS social security garnishment depend largely on what your tax and financial situation look like. You should be proactive in resolving the situation as interest and penalties accrue when you have back taxes or unpaid taxes.
If you cannot pay your tax bill, and you believe the bill is a mistake, contact the IRS. If you simply cannot pay, you still need to file and you may want to consider investment, retirement, or savings accounts you can use or utilize in some way (borrowing against 401k) to satisfy taxes owed. Getting a loan to pay it off or using a credit card is another option if you qualify, but you need to weigh the costs and interest of pursuing these options. As a basic requirement, you need to have all tax returns filed, a Collection Information Statement available (in most cases) to resolve your tax situation in considering the options below:
If you owe less than $25k in taxes, you can request an IRS Installment agreement, which is an payment plan that allows you to pay back the IRS over a number of years. Interest and penalties still continue to accrue, so the faster you pay down your taxes, the less penalties and interest you pay.
If you owe more than $10k in taxes, and you do not qualify for a regular IRS Installment Agreement, you may want to look at an Partial Payment Installment Agreement. You have to verify your financial situation with the IRS, but serves as a great alternative to an Offer in Compromise as it is easier to obtain. You must have no assets, or if you do have assets, they are not sufficient to resolve your tax problems. Interest and penalties accrue, but you may not pay them as the statue of collections makes part of your debt uncollectible.
If you do not qualify for an Installment Agreement or cannot resolve your tax problems through a PPIA, you may want to make an Offer In Compromise (OIC) which is an agreement with the you and the IRS to pay less taxes than you owe. Whether your OIC is sufficient, depends on whether it is equal to or greater than your reasonable collection potential.
If your financial situation is dire, you could potentially be deemed by the IRS “Currently Not Collectible.” You will have to verify that your financial situation is poor through a Collection Information Statement and that you do not have the assets or income to satisfy your current tax liabilities. The IRS has a set of standards it follows as to what expenses are necessary for you to live. Realize interest and penalties continue to accrue but the IRS will not try to levy you during this time.
If you believe the Social Security levy should not have been filed or you disagree with it, you should formally appeal the levy under the Collection Appeals Program (publication 1660 helps) or Collection Due Process Program. Normally, a Final Notice of Intent to Levy will provide you your appeal rights for a “Collection Due Process” appeal. You will need to fill out IRS form 12153, “Request for a Collection Due Process or Equivalent Hearing,” and get it postmarked within 30 days from the Notice of Intent to Levy.
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