Every month, millions of Americans receive social security payments. For some individuals, social security is their sole source of income. And owing back taxes might result in a social security garnishment for many people.
In this article, we will explain social security garnishment and how it happens.
We will also provide tips on how to stop social security garnishment from happening to you.
Can the IRS Garnish Social Security Payments?
Yes, if you have an outstanding tax debt, the IRS may levy (garnish) your social security payment. This means that they will take a portion of your social security payment and use it to pay off your debt.
The amount that they take will depend on how much money you owe and the type of income you receive.
However, the IRS does not have the authority to garnish Social Security benefits in a number of circumstances. The IRS can only take a certain proportion of your social security payment each month.
It’s also worth noting that owing back taxes has no impact on your ability to apply for or receive Social Security benefits.
How Much Can the IRS Garnish of Social Security?
IRS SSI Levy Limits: Under the IRS’s FPLP, it may take up to 15% of your Social Security pay each time you get paid.
The IRS will utilize this amount to reduce the Amount Due on your tax bill. The IRS will continue to seize your benefits until you pay back taxes in full.
What Happen Before the IRS Garnishes Social Security?
The IRS will send you a letter notifying you of their intention to levy before seizing your Social Security payments. The IRS will first send you a notice stating their plan to seize your benefits.
This notice, known as a Final Notice Before Levy on Social Security Benefits IRS Form CP91 or CP298, is an example of an IRS form. If you receive a Final Notice from the IRS, you will have 30 days to respond. The notice will also tell you your appeal rights.
If you believe that you are not responsible for back taxes, you may appeal to the Office of Appeals at the IRS. The Office of Appeals is a distinct entity within the IRS that handles tax disputes.
If you do not pay your outstanding taxes or sign up for a repayment plan, the Social Security Administration will deduct 15% from your monthly check.
Can the IRS Garnishment Social Security Disability Payments (SSDI)?
The IRS cannot garnish your Social Security Disability payments (SSDI) without taking legal action against you. They would have to file a lawsuit and get a court order to garnish your payments.
The IRS’s authority to garnish Social Security benefits is restricted in several ways. The following types of payments are not subject to garnishment by the IRS:
- Social Security Disability Insurance Benefits
- SSI payments and partial withholding to repay debts owed to Social Security are paid in addition to income tax.
- Individuals who earn less than the Department of Health and Human Services’s poverty thresholds are considered to be tax-qualified.
- Benefits paid to children and lump-sum death benefits
If you are notified by the IRS and any of the circumstances above apply to you, contact your assigned IRS caseworker right away.
Can Social Security Be Garnished for State Taxes Owed?
No, If a state government is seeking to recover unpaid taxes, it does not have the same broad collection authority as the IRS when it comes to Social Security benefits.
Additionally, most sorts of liabilities are not able to be garnished from Social Security payments. If you owe medical costs, credit cards, or personal loans, your creditors cannot seize your benefits.
However, there is one critical thing to remember. If you do not get your money through direct deposit and mix your social security payments with other funds, the IRS could garnish your benefits through a bank account seizure.
If your Social Security payments are subject to a state tax lien, the funds can be taken from your bank account. As a result, if you owe back taxes to the state, it might be possible for them to draw on your bank account by levying your pension benefits. You’ll need to show that the money is related to your Social Security
How to Stop the IRS from Garnishing Social Security or to Release the Levy
You should not have to wait until you get a CP91 or CP298 Notice to contact the IRS about paying your taxes.
Many people are unaware that they can use IRS-approved methods to pay their taxes until after the deadline. Others avoid doing so because they are unable to pay or fear the IRS.
However, if you receive a Final Notice from the IRS, it is critical to take action as soon as possible. If you get a Notice, here are some of the most common alternatives taxpayers have when deciding what to do next:
Ignore the Notice
Of the above options, ignoring the Notice is the worst course of action. After 30 days from your receipt of the Notice, the IRS will begin garnishing your monthly check. Paying the full amount owed is the best option to avoid or release a levy.
However, this is not a realistic choice for most people. In addition to the original amount owed, you may be liable for penalties and interest. We discussed below the right to file an appeal.
File an appeal
The CP91 or CP298 Notice will inform you of your appeal options. A tax appeal is an effective approach to challenge the amount of back taxes and/or buy yourself some extra time to work out a solution with the IRS before a garnishment.
For many taxpayers, the best option is to negotiate a payment plan or submit an Offer-in-Compromise to the IRS.
Pay the back taxes
The IRS has a variety of payment options available. Your qualification for a particular payment plan is largely determined by your ability to pay back the tax. A short-term plan, for example, is one that requires you to make full payments within 120 days.
Long-term payment plans allow you to pay over a period of more than 120 days. Long-term payment plans have different application charges, depending on how you set up the plan.
If you can’t make the required minimum monthly payment on a regular payment plan, you may wish to explore a Partial Payment Installment Agreement.
This approach might help you pay off more of your tax debt over time, but it also allows you to make regular payments. The IRS, on the other hand, uses your monthly income, expenditures, as well as obligations and assets to determine your capacity to pay.
Offer in Compromise
Offers of compromise (OICs) allow you to pay less than the amount you owe in back taxes. The process of applying for and obtaining an OIC may be tough.
An OIC is generally accepted by the IRS when the amount offered meets their minimum payment standards, and the taxpayer is current on all tax filing obligations.
Non-Collectible Status (Hardship)
When the IRS is attempting to collect taxes, you may be eligible for Non-Collectible Status (CNC) if your tax debt is large. To demonstrate financial hardship to the IRS, you must apply for CNC status.
The IRS will calculate how much money you have to pay and how much property you own to see whether you can afford to make installments. If you are designated CNC, the IRS will delay collecting your Social Security checks and will not try to seize your benefits further.
If you have a lot of personal debt in addition to tax obligations, bankruptcy may be an option for you. Depending on the type of taxes owing, bankruptcy might be a viable strategy for dealing with back taxes.
If the taxes owed are more than three years old, and the IRS has assessed taxes at least 240 days before the filing of a bankruptcy case, the liabilities can generally be relieved.
If you do not meet the criteria for chapter 7 or are otherwise ineligible to file, you can repay back taxes over a three- to the five-year period under Chapter 13. For more information, contact a bankruptcy lawyer.
Experiencing Social Security Garnishment? We can help
Whatever remedy you select, the IRS will need to lift any levy. You’ll need to get a release order from the IRS.
The Social Security Administration will then be required to react. It can take months for the payment to appear in your Social Security check after it has been released.
The IRS garnishment procedure might be quite distressing. In addition to losing a portion of their monthly pay, IRS rules and processes may be difficult to comprehend.
Call now for a free consultation to get your alternatives and decide if you want to hire a tax attorney.