The Internal Revenue Service (IRS) can take Social Security benefits to cover your unpaid back taxes. The IRS can seize retirement, adult survivor benefits, and disability benefits in some cases. The agency cannot take lump sum death benefits, survivor’s benefits paid to children, or Supplemental Security Income (SSI).
If you don’t pay your taxes, the agency may also be able to seize 401K or other retirement savings accounts and certain types of pensions or retirement income. Acting quickly and either paying off your balance or applying for tax relief will help you avoid an IRS tax levy.
To get help, contact Damiens Law today. We provide boutique tax resolution services and work closely with our clients to find solutions for their unique situations. In the meantime, here’s what you need to know about tax levies on Social Security.
Key Takeaways:
- Automatic levy – IRS can seize 15% of Social Security retirement or survivors’ benefits paid to adults through its automated system.
- Manual levy – IRS can seize SS retirement, survivor’s benefits paid to adults, and disability payments through a manual levy.
- Final Intent to Levy Notice – Gives you a 30-day warning before seizing your SS payments.
- Collection due process hearing – Request a hearing to talk about payment options by the deadline on the Intent to Levy notice.
- How to avoid – Set up a payment plan, apply for an offer in compromise, or get on currently not collectible status.
- How to stop – IRS must stop the levy if you prove it is creating financial hardship or if it was issued incorrectly.
What Is a Tax Levy on Social Security Benefits?
A tax levy is when the IRS seizes your Social Security payments for unpaid taxes.
Most commonly, the IRS uses the automated Federal Payment Levy Program (FPLP) to seize SS benefits. The FPLP can seize 15% of retirement benefits or survivor benefits paid to adults. The IRS cannot use the FPLP to seize disability payments or any other type of Social Security payments.
The IRS can also use a manual levy to seize Social Security benefits. Manual levies are initiated by revenue agents, and they can apply to varying portions of your SS payments. Manual levies can apply to retirement benefits, survivor benefits paid to adults, and disability payments.
The IRS can never levy lump sum death benefits, SSI, or survivor benefits paid to children.
What to Expect If the IRS Garnishes Your Social Security
If you have unpaid taxes, the IRS will send several demands for payment followed by a Notice of Intent to Levy. This notice explains that the IRS can seize your assets, and it outlines your right to appeal.
In particular, the IRS will send you notice CP91 or CP298 (Final Notice Before Levy on Social Security Benefits). At this point, you have 30 days to respond. If you don’t pay your tax liability, make other arrangements, or request a Collection Due Process hearing, the IRS will start to levy your payment.
How to Avoid a Social Security Garnishment on Tax Debt
To protect your Social Security benefits and other assets, you should make arrangements for your tax debt as soon as possible. If you get approved for any of the following before the levy starts, the IRS won’t take your Social Security payments:
- Installment agreement: If you owe less than $50,000, you can set up a monthly payment plan without providing a financial disclosure to the IRS. If you owe more than $50,000, the IRS will require a Collection Information Statement, but you should still be able to qualify.
- Partial payment installment agreement (PPIA): A PPIA lets you make monthly payments until the collection statute expiration date, which is 10 years. This is the last date the IRS can enforce collections on the debt. After this date, the IRS lets the remaining balance expire. You must make a financial disclosure to qualify.
- Offer in compromise (OIC): An OIC is when you pay less than you owe, and the IRS discharges the rest of the bill. You can pay in a lump sum or in installments over 24 months. To qualify, you must convince the IRS that your offer is the most you can afford to pay.
- Currently not collectible (CNC): If you contact the IRS and prove that you cannot afford to pay your tax liability, the agency will mark your account as CNC. This will stop all collection actions against you, including Social Security garnishments. The IRS may review your file every couple of years to see if anything has changed. If SS is your only income, you may be able to secure CNC status with less paperwork than usual.
Keep in mind that tax levies don’t start right away. If you’re filing a tax return and can’t afford to pay, you don’t have to worry about the levy starting instantly.
In this situation, you should reach out to a tax attorney and discuss your options. Then, you can set up a payment plan or make other arrangements for your tax debt before the IRS starts to garnish your Social Security.
You should still file your tax return even if you can’t afford to pay your tax liability. The tax penalties for not paying are much lower than those for not filing. Once you file, you can request a payment plan. In fact, you can even attach a request for a payment plan to your tax return, and if you owe less than $10,000, the IRS will typically accept the request as long as you can pay off the balance within three years.
How to Stop an IRS Social Security Levy
If the IRS has already started to garnish your Social Security, they must stop the levy if it was issued in error. Here are situations where the IRS is not allowed to start a levy.
- Didn’t follow protocol: For example, if the IRS didn’t send you notice with a 30-day warning that outlined your right to request a hearing.
- After the debt expires: The IRS has approximately 10 years to collect tax debts. It cannot issue levies after the Collection Statute Expiration Date (CSED).
- Pending resolution application: The IRS is not allowed to issue levies when you have a pending request for an installment agreement, innocent spouse relief, or offer in compromise.
- While you’re appealing: Except in limited cases, the agency can’t legally issue levies while you’re appealing an issue with the Tax Court.
- Bankruptcy stay: The agency cannot issue a levy if you’re filing for bankruptcy and a stay is in place.
If any of these situations apply, the IRS must stop the levy. Contact a tax attorney to help you if you have questions about these situations.
If the IRS issued the levy correctly, here are other ways that you can stop it:
- Full payment: Pay the tax debt in full.
- Qualifying payment plan: Set up a payment plan and ensure its terms don’t allow the garnishment to continue.
- Benefit of the IRS: Convince the IRS that stopping the levy will help you pay your taxes.
- Financial hardship: Prove that the levy creates financial hardship and prevents you from paying your living expenses.
- Exempt assets: Establish that the levy is against exempt assets.
How the Exempt Amount Affects You
Whether you work, collect Social Security, or both, a certain amount of your income is exempt from tax levies. The amount is based on the standard deduction and the number of dependents you have.
As of 2024, the exempt monthly amount is $1,216.67 for a single filer with no dependents. It is $3,266.67 for a married couple filing jointly with two children. The IRS updates these numbers annually in Publication 1494.
However, most Social Security garnishments happen automatically through the FPLP. In other words, the agency takes 15%, and no human agent is reviewing the garnishment to ensure it doesn’t exceed the exempt amount. If the amount left after the garnishment is less than your exempt amount, you should immediately contact the IRS or reach out to a tax attorney for help.
Keep in mind, however, that the IRS can take any amount over the exempt amount. Say that the IRS does a manual levy to garnish all of your Social Security over the exempt amount, but then, a few months later, you decide to get a part-time job. Once the IRS realizes you have a job, the agency can send a garnishment letter to your employer. Because your Social Security payment covers the full exemption, the IRS can garnish 100% of your paycheck.
What Is the Federal Payment Levy Program?
The Federal Payment Levy Program allows the IRS to seize tax debts from federal payments. Under the FPLP, the IRS can levy the following amounts until your tax debt, interest, and penalties are paid in full:
- Up to 15% of federal employee retirement annuities
- Up to the full amount of payments to federal vendors
- Up to the full amount of travel advancements or reimbursements for federal employees
- Up to 15% of salaries paid to some federal employees
- Up to 15% of Social Security Old Age and Survivor benefits and Railroad Retirement benefits
To levy these funds, the IRS sends a file with tax debt details to the Bureau of Fiscal Services (BFS). The BFS scans its database and alerts the IRS if there’s a match. Then, the IRS sends a notice of levy to the taxpayer, and if the taxpayer doesn’t respond, the levy starts in 30 days.
The majority of the payments seized through the FPLP are Social Security payments — during the first six months of 2020, 72% of the payments seized through this program were Social Security benefits.
In 2011, the IRS created a low-income filter to prevent the program from affecting low-income taxpayers, but in spite of the filter, some low-income taxpayers still end up facing levies on their Social Security benefits. If that has happened to you, contact the IRS directly or contact a tax attorney for help.
FAQs about Social Security Levies
Here are answers to some of the most commonly asked questions about tax levies on Social Security benefits. The answers to these questions are all in the above sections, but we included them here as well for easy reference:
Can Social Security Be Garnished by the IRS?
The IRS has the right to seize your Social Security benefits and other forms of income or assets if you continue to fail to pay your tax balance and you don’t try to rectify the situation with a payment plan or tax relief option.
How Much Can the IRS Garnish From Social Security?
The IRS can garnish 15% of your payment. In the past, the law required the agency to leave at least $750, but now, with the automated system, the IRS can take 15% regardless of how much you have left. If the IRS uses a manual levy on your benefits, they may take more or less than 15%.
However, you are entitled to a certain exempt amount based on your filing status and number of dependents. You should contact the IRS to stop or reduce the levy if the garnishment exceeds this amount.
Can the IRS Garnish Social Security Disability?
As of 2015, the IRS cannot use an automated levy to seize disability payments, but the agency can still use the manual levy process to get these benefits.
Can the IRS Garnish Supplemental Security Income?
The IRS cannot garnish Supplemental Security Income (SSI). SSI is a monthly cash payment for low-income people who are disabled, blind, or over 65. Although the Social Security Administration administers the program, the benefits are not the same.
Can You Collect Social Security If You Owe Back Taxes?
Yes, you can collect Social Security benefits even if you owe back taxes. If you’ve recently become eligible for Social Security, you can sign up for benefits regardless of how much tax you owe. However, once you start receiving monthly payments, the IRS may be able to seize a portion of your payments to cover your tax debt.
How Long Can the IRS Garnish Social Security?
The IRS can garnish your Social Security payments until the back taxes are paid off in full or you get them to stop the levy for some other reason.
How Do I Stop the IRS From Garnishing My Social Security?
Pay off your tax balance in full, if possible, and as soon as you can. If you can’t afford your tax bill, don’t ignore IRS notices. Apply for an installment agreement to pay off your balance monthly, request currently not collectible status if you can’t pay right now, or apply for an offer in compromise to settle your debt.
Get Help if the IRS Is Garnishing your Social Security
So, can the IRS take your Social Security? Unfortunately, yes, under certain circumstances. However, you can stay proactive against this drastic step if you apply for tax relief or pay off your balance.
If the IRS is garnishing your payments or you’re worried about garnishment, contact us today. At Damiens Law, we are devoted to helping our clients find the best resolution for their unique tax problems. When you contact us, we can discuss your tax issues and help you find relief tailored to your unique situation.
