Are you behind on your tax payments? Dealing with tax debt is particularly challenging when you’re retired or on a fixed income. You may be worried about the IRS taking your Social Security money. Can the IRS garnish Social Security benefits and other types of retirement income? Or are they exempt from garnishment?
The bad news is the IRS can take your Social Security. However, there are exceptions and limits to what the IRS can do. Here’s what you need to know.
Can the IRS garnish Social Security benefits?
Short answer, yes. The IRS can take money from your Social Security to help repay the tax debt that you owe them.
The longer answer is, only sometimes! The IRS can only garnish certain types of Social Security benefits, and it can only take a set percentage. You can find further details in the Federal Payment Levy Program (FPLP).
The FPLP was created in 2000 by the Bureau of Fiscal Service (BFS) and the Department of Treasury. It authorizes the IRS to collect overdue taxes through a continuous levy of BFS federal payment disbursements.
What types of Social Security benefits can the IRS garnish?
The IRS can garnish certain types of Social Security benefits, as well as federal employee retirement annuities, federal salaries, and Military Retirement Benefits. In the case of Social Security benefits, Federal Old-Age and Survivors’ benefits are subject to levies by the IRS.
What are Federal Old-Age and Survivors’ benefits?
These are benefits most people receive upon retirement. They are paid to workers who retire as well as the spouses and children of those workers, and surviving family members of deceased insured workers.
Which Social Security benefits are ineligible for garnishment?
The FPLP cannot garnish the following benefits:
- Lump-sum death benefits.
- Payments with partial withholding repaying a debt to Social Security.
- SSA Disability Insurance benefits.
- Benefits paid out to children.
- Supplemental Security Income (SSI) payments under Title XVI.
Additionally, taxpayers whose income falls at or below the poverty level will not have any of their Social Security benefits garnished through the FPLP.
How much of my Social Security benefits can the IRS garnish?
The IRS can levy up to 15% of your eligible Social Security benefits until you repay your tax debt in full or come to another agreement. Note that there is no guarantee on a minimum benefit amount when you owe the IRS. However, if you owe non-tax debts, the 1996 Debt Collection Improvement Act protects the first $750 of your benefits.
What happens before the IRS garnishes my Social Security benefits?
If the IRS garnishes your Social Security benefits, it won’t come as a surprise. The IRS must provide fair warning before taking action. Before your benefits are put at risk, you’ll receive a series of letters, including the final notice of their intent to levy.
If you do not come to a resolution with the IRS after that notice, another letter will be sent (CP 298, CP 91, or the Final Notice Before Levy on Social Security benefits). At this point, you have 30 days to contact the IRS before the levy begins.
How to prevent IRS garnishment of Social Security benefits
Let’s say that you received a notice informing you of the IRS’s intentions to garnish your Social Security benefits. If you want to prevent them from doing so, you’ll need to contact them immediately. The notice you received will explain your options. If you’re still not sure how to proceed, discuss the matter with an IRS representative over the phone.
Usually, you can work out a payment arrangement for the debt you owe. As long as you stick to the terms of your agreement, this will prevent the garnishment.
If, on the other hand, you disagree with the debt that the IRS says you owe, you can file an appeal, which would halt the collections process until the appeal is settled.
But what if your Social Security benefits have already been garnished, and you want the garnish lifted? In this case, you’ll need to contact the IRS to make a payment arrangement or file an appeal. Unfortunately, even if the IRS agrees to release the garnish, it may take some time for them to restore your benefits to the full amount. Obviously, it’s better to prevent the levy in the first place.
Call in a tax expert for help
Managing tax debts and negotiating with the IRS can be stressful and time-consuming. When you owe the federal government, you are negotiating with an organization that holds a great deal of power. If you’re not confident in your ability to negotiate with the IRS, it may be wise to enlist a tax expert to serve as your advocate.
Want someone on your side to help with a tax issue? Review top-rated tax relief firms below to find the right fit for your situation.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.