Social Security Garnished by IRS? Limits, Rules & How to Stop
Can the IRS Garnish Social Security?
The government can garnish Social Security benefits for delinquent tax debt. Most private creditors cannot garnish Social Security benefits, but Title II of the Social Security Act and Section 6331 of the IRS Code outline exemptions for tax debt. The IRS can utilize the automated Federal Payment Levy Program or use a manual levy. This applies to Social Security disability program payments, retirement payments, and survivor payments. However, the IRS cannot garnish lump-sum death payments, children’s benefits, and Supplemental Security Income (SSI).
How Much Can the IRS Garnish of Social Security Benefits?
Under the automated Federal Payment Levy Program, the IRS can garnish up to 15 percent of Social Security benefits. For example, if your benefit is $1,000, the IRS can take up to $150. Through a manual levy, the government does not take a set percentage. Rather, it allots you a minimum amount of living expenses and garnishes everything over that amount.
The IRS updates the guidelines every year. As of 2018, if you are single with one exemption, you can keep $887.50 per month. If you are married filing jointly with two exemptions, you can keep $1,775 monthly. The limits increase if you have more exemptions. The IRS can garnish everything over those amounts.
What Happens Before an IRS Social Security Levy?
Before garnishing your Social Security payments, the IRS issues several letters. Typically, about 60 days after you file a return where you owe money, the IRS sends CP-14. This notice notifies you of the balance and demands payment. If you don’t reply, CP-501, CP-503, and CP-90 or CP-297 follow.
Finally, you receive CP 91 or CP 298. These letters are a formal notice that the IRS plans to levy your Social Security benefits. At this point, you have 30 days from the date on the letter to resolve the issue. Don’t call the Social Security Administration. You have to work with the IRS.
Note that before the IRS can take any property or garnish any payments, they must meet these three conditions:
- The IRS assessed tax and sent you a notice demanding payment.
- You failed to pay your bill or resolve the unpaid tax in another manner.
- The IRS sent you a Final Notice of Intent to Levy and waited 30 days.
Once the IRS meets the three conditions, the IRS can legally seize your property, and in this case, part of your Social Security Benefits. If the levy starts without these three things happening, you need to appeal.
Options to Stop the IRS Garnishment of Social Security for Back Taxes
There are a number of ways to stop a Social Security garnishment. The right options depend on your tax and financial situation. Here are some of the possibilities:
- Full Payment — To stop the garnishment, some people take out loans, borrow from their retirement accounts, or find other means to pay the entire tax bill. Paying in full stops interest and penalties from accruing, but before borrowing money, you should compare the interest rate on the private loan to what the IRS offers for installment plans.
- IRS Installment Agreement — If you owe less than $50,000, you can set up a streamlined installment agreement. Then, you make monthly payments on your tax debt for up to six years. As of 2018, the government is exploring expanded criteria that allow you to take up to eight years to pay off up to $100,000.
- Partial Payment Installment Agreement (PPIA) — This option also lets you make monthly payments, but you don’t have to pay all of your tax debt. The IRS sets up the payments so that some of the debt expires. That saves you money in the long run. To qualify for a PPIA, you have to share detailed financial information with the IRS.
- Offer In Compromise — Similar to a PPIA, an offer in compromise lets you pay less than you owe. You have to make a lump sum payment or pay off the offer within 24 months. To qualify, you must make a full financial disclosure to the IRS.
- Currently Not Collectible (CNC) — If your financial situation is dire, you may qualify for Currently Not Collectible status. You have to submit a Collection Information Statement and prove that you don’t have any assets or income to cover your tax debt. CNC status stops all collection activity for a few years, but the IRS reviews your account periodically to see if anything has changed.
- Bankruptcy — In some cases, you can get tax debt discharged through bankruptcy. However, the tax debt must meet detailed criteria such as being an income tax that is more than three years old. Only consider this option if you have overwhelming consumer debt and you’ve talked with a tax or bankruptcy professional.
- Innocent Spouse Relief — When the tax debt is exclusively due to your spouse or ex-spouse’s actions, you may be able to get relief through the innocent spouse program. This only applies in rare situations so you may want to get help to apply.
- Appeal the Social Security Garnishment or Levy — If you disagree with the Social Security levy, you should appeal. The final notice of intent to levy should outline your right to appeal. A Collection Due Process hearing can be requested within 30 days of receiving that letter. You have the right to request an equivalent hearing for about a year. The Collection Appeals Program can also be used to appeal. Start by filling out Form 12153 (Request for a Collection Due Process or Equivalent Hearing).
- Professional Help — A tax resolution specialist can help you stop a Social Security wage garnishment. These professionals start with a free, no-obligation consultation. Then, they help you decide the best approach based on your personal financial situation. Remember, you need to be proactive because interest and penalties are accruing.
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