IRS Tax Levy

Can The IRS Garnish Social Security Payments?

Those who receive Social Security benefits but find themselves in tax trouble often ask, “Can the IRS take your Social Security?” The government can garnish Social Security benefits for delinquent tax liability. 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 liability. 

The IRS can utilize the automated Federal Payment Levy Program or use a manual levy. The agent can use the automated levy on retirement payments and survivor payments paid to adults, but as of October 5, 2015, disability benefits are no longer subject to levy.

However, the IRS cannot garnish lump-sum death payments, children’s benefits, and Supplemental Security Income (SSI). 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 allows you a minimum amount of living expenses and garnishes everything over that amount. The IRS updates the guidelines every year. As of 2024, if you are single with one exemption, you can keep $1216.67 per month. If you are married filing jointly with two exemptions, you can keep $3266.67 monthly. The limits increase if you have more exemptions. The IRS can garnish everything over those amounts through a manual levy.

What Happens Before an IRS Social Security Levy?

Before the IRS can garnish 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 they will follow up with CP-501, CP-503, and CP-90 or CP-297 letters.

Finally, you receive CP 91 or CP 298. These letters are a formal notice that the IRS plans to levy your Social Security benefits – or garnish your Social Security. At this point, you have 30 days from the date on the letter to resolve the issue. Don’t call the Social Security Administration, as they are not able to help you with this. 

The IRS is garnishing your Social Security; therefore, you will need to work with the IRS. Note that before the IRS can take any property or garnish any payments, they must meet these three conditions:

1. The IRS assessed the tax and sent you a notice demanding payment.
2. You failed to pay your bill or resolve the unpaid tax in another manner.
3. 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, they can garnish part of your Social Security benefits. If the levy starts without these three things happening, you need to appeal.

How Do I Stop the IRS From Garnishing My Social Security?

There are a number of ways to stop a Social Security garnishment. You can also use many of these options to stop a wage 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 liability for up to six years. You can get longer payment plans in certain situations. You can also set up payment plans on bigger balances, but you may need to provide financial disclosures.
• Partial Payment Installment Agreement (PPIA) — This option also lets you make monthly payments, but you don’t have to pay all of your tax liability. The IRS sets up the payments so that some of the liability 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 liability. 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 liability discharged through bankruptcy. However, the tax liability 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 liability and you’ve talked with a tax or bankruptcy professional.
• Innocent Spouse Relief — When the tax liability 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 — The W Tax Group is highly experienced in these matters and can take decisive action immediately. Remember, it is prudent to be proactive because interest and penalties are accruing quickly.

FAQs About SS Garnishment

Can the IRS take your Social Security?

Yes, the IRS’s automated levy system can garnish 15% of your Social Security payments. If the agency sets up the levy manually, it may be able to take even more of your payments. 

Can the IRS garnish disability payments?

Yes, the IRS can garnish disability payments you receive through SSDI. However, the IRS must do a manual garnishment; the automated system cannot levy disability benefits as of 2015.

How do I stop the IRS from garnishing my Social Security?

When you receive the notice that the IRS is going to levy your Social Security, appeal te levy and discuss payment options with the IRS during the Collection Due Process hearing. Alternatively, if you owe less than $50,000 and have a history of compliance, set up a payment plan online before the deadline on the notice. If you haven’t received a notice yet, protect your SS payments by making proactive payment arrangements with the IRS.

Can you get Medicaid if you owe back taxes?

Yes, your ability to get public assistance is not based on whether or not you owe back taxes. If you qualify for Medicaid based on your state’s rules, tax debt won’t stop you from getting benefits.

Protect Your Benefits – Work With a Tax Attorney

If your Social Security or other income sources are being garnished you need to take action fast, but if you’re like most taxpayers, you might not even understand your options. This is why we offer a 100% free consultation. Our honest, licensed tax professionals will evaluate your situation and provide you with the answers you need. Chat with us live right now or call us if you prefer. We are NOT salespeople, we’re true tax professionals. The team at the W Tax Group can help you protect your Social Security and get back on track with IRS compliance.