Many people rely on their social security benefits as a way to bridge the gap between their retirement income and their monthly expenses. For others their social security may be their only source of income in retirement. Which ever may be the case, if you owe back taxes to the IRS you may be asking yourself the question, can the IRS garnish my social security? In short: Yes.
The IRS uses what is called the Federal Payment Levy Program (FPLP). This program is used to implement a continuous levy on federal payments issued by the Bureau of Fiscal Services (BFS). Payments from the BFS include:
- Federal employee retirement annuities,
- Federal payments made to you as a contractor/vendor doing business with the government (including Defense contracts),
- Federal employee travel advances or reimbursements,
- Certain Social Security benefits paid to you,
- Some federal salaries,
- Medicare provider and supplier payments.
- Railroad Retirement Board benefits paid to you.
- Military Retirement
HOW DOES THIS AFFECT YOUR SOCIAL SECURITY BENEFITS?
- The IRS doesn’t automatically levy your social security income the moment you start receiving it. In fact, they will go through all of the normal steps of notifying you of your past due taxes before taking collection action. A Final Notice of Intent to Levy is generally the last notice before the IRS takes collection action but, when it comes to collecting from someone’s social security they take an additional step. The additional step includes one last notice, Final Notice Before Levy On Social Security Benefits (CP91 or CP298).
- You have 30 days from the receipt of the Cp91 or CP298 to respond before the IRS begins to levy your social security benefits. When responding to this notice you can avoid the levy by negotiating an installment agreement with the IRS or by filing an appeal but, the appeal is only a temporary solution to give you more time to resolve the issue.
- The amount that the IRS is able to levy your social security is 15% of your monthly benefits.
IS ANYTHING EXCLUDED?
Though the IRS has many different ways to collect a tax debt from you, there are some exceptions. (Note: If a Revenue Officer is assigned to your case, they do have the ability to determine whether to include these items.)
- As of Oct. 5th, 2015, the IRS no longer includes SSA Disability Insurance Benefits.
- The lump sum death benefits and benefits paid to children.
- Supplemental Security Income payments and payments with partial withholding to repay a debt owed to Social Security.
- As of 2011, the IRS will exclude certain taxpayers where their income is deemed to be below the poverty guidelines.
RELEASING A LEVY ON YOUR SOCIAL SECURITY BENEFITS
Having a levy released that is already currently in place on your Social Security benefits is something that takes quite a bit of time and the reason for this may not surprise you. You see, a typical wage garnishment or bank levy is issued by the IRS to your employer or bank. When the levy or wage garnishment is released the release order can be faxed directly to your employer or bank and the turn around time for getting someone to process the release is fairly quick.
In the case of a levy on your social security benefits, you not only have to go through the process of getting the release order from the IRS but, the release order also has to be processed by the Social Security Administration. If you’ve ever dealt with the Social Security Administration you’re well aware that the processing times for anything could take time.
Generally if a release of levy is granted by the IRS you can expect the release to be reflected on your social security income after a month or two.
Having a levy placed on your Social Security benefits will often times cause a financial hardship. Ignoring the notices is never a good idea because the longer the issue goes unresolved, the longer it will take to fix. The time it will take to deal with the Social Security Administration to make sure the the levy is released, if one is put in place, will end up costing more time and effort than it would to address the issue upfront.
If you need help with this type of issue because you’re unsure of what to do, contact a tax professional to discuss your options.
- A Deeper Look at How to Stop the IRS from Garnishing your Wages
- Differences Between A Wage Garnishment and Contractor’s Levy
- IRS Levy Considerations for Federal Contractors – Including Defense Contractors