IRS Social Security Garnishment: Stopping It, Rules, and Tips

The IRS can take your Social Security payments if you have unpaid taxes. Only SSI and children's benefits are exempt -- the agency can go after any other Social Security benefits. Automed levies (seizures) take a set percentage of your monthly payments, but manual levies implemented by a revenue officer can theoretically take all of your payments. Don't wait -- look at the options and learn how to protect your Social Security today. Already facing the threat of losing your SS payments? Then, use TaxCure to find a licensed tax resolution professional today.

Key takeaways

• The IRS can seize Social Security benefits if you don't pay your taxes.
• Automted levies take 15% of benefits, while manual levies may take even more.
• To prevent a levy, set up payments or secure hardship status.
• A Final Intent to Levy notice gives you 30 days to respond or the agency will seize your benefits. 
• Work with a tax pro to protect your finances and get back on track with the IRS.

Can the IRS Garnish Social Security Payments?

Yes. The IRS can garnish Social Security payments for unpaid taxes. This is only a risk in situations where the taxpayer refuses to pay the IRS and doesn't reach out to the agency to make any other arrangements on their tax debt. You will receive a notice and get a chance to appeal before the IRS starts the garnishment process, but if they don't have the right address or if you throw away your mail, you may notice smaller payments before you realize what's happening. 

The IRS uses two different processes to garnish Social Security payments 

Automated Social Security garnishments

Since the beginning of 2002, Social Security benefits paid out by the Bureau of Fiscal Services (BFS) are subject to a levy through the Federal Payment Levy Program (FPLP). Through the FPLP, the IRS can only garnish a specific percentage of your social security check each month. Important to know, generally lump sum death benefits and benefits children receive are not within the FPLP. 

Manual Social Security garnishments

If a revenue officer has been assigned to your account, they can use a manual levy to seize your Social Security payments, and in this situation, they can take more or less than the 15%. The garnishment will be based on your overall financial picture. As long as you have money to survive (for example, through wages or a pension), the agency may potentially take all of your Social Security payments.

Understanding the Federal Payment Levy Program (FPLP)

The Federal Payment Plevy Program (FPLP)  is a program which allows the IRS to collect past due taxes directly from federal payments owed to taxpayers.

How the FPLP Works

When a taxpayer owes the IRS, the FPLP allows the IRS to seize specific federal payments until the tax debt is fully paid off. This program applies to various types of federal payments which include:

• Federal Employee Retirement Annuities: Up to 15% can be seized.
• Payments to Federal Vendors: The IRS can seize 100% of the payment amount
• Federal Employee Travel Advancements or Reimbursements: The IRS can seize up to 100% of these payments.
• Wages: The IRS can typically seize up to 15% of salaries paid to certain federal employees
• Social Security Benefits: UP to 15% of these benefits and be seized. 

Process of How it Works

1. IRS Submission to Bureau of Fiscal Services (BFS): The IRS sends the details of the debt to the BFS
2. BFS Processes: The BFS scans the records and find a match to a taxpayers
3. Notice of Levy: When there is a match, the IRS will send a notice of intent to levy to the taxpayer.
4. Taxpayer response: Taxpayer has 30 days to respond before the levy is enforced.

Impact on Social Security Payments

A big portion of the funds seized through FPLP come from Social Security Payments. These are the most common form of federal payments and are the easiest methods for them to collect.

What to Expect If the IRS Garnishes Your Social Security Payments

The good news is that the IRS will give you advance notice before garnishing your Social Security benefits. The IRS will send you a Final Notice of Intent to Levy. That may be Letter 1058, Letter 11, or CP90, which are all general levy notices saying that the agency may seize your wages or assets. The agency may also send CP91 or CP298 which are specifically about Social Securty garnishments. 

All of these letters give you 30 days to respond, and they outline your right to appeal. If you don't respond, the Social Security levy will move forward. But you can stop the garnishment from moving forward by requesting a Collection Due Process hearing, setting up payment arrangements, or proving that the agency made a procedural error -- more details on all these options below. The deadline is extremely strict, and you must take action before it passes.

Procedural Errors and Other Legal Grounds to Stop a Social Security Garnishment

When it comes to garnishing Social Security benefits, the IRS must follow specific rules. If they did not follow these rules, the IRS must remove the levy. Below is an overview of the main scenarios where the levy removal is required:

• Errors in Issuance. If the levy was done in error, it must be removed. This happens when the IRS didn't follow the proper protocols or if the levy was mistakenly applied to your account
• Failure to Send Proper Notices: The IRS is required to send specific notices before issuing a levy. Generally, these notices come by certified mail. These notices give you a right to a hearing. If these notices were not sent, then the levy must be lifted.
• Collection Statute Expiration Date (CSED): The taxes owed have become no longer collectible by the IRS because the statute of limitations has expired. If the debt has expired, the levy must be lifted.
• Pending Requests for Resolution: If the taxpayer submitted a request for a resolution, the levy cannot be issued during the review process. The common forms of resolution are installment agreements, offer in compromise and rare cases of innocent spouse relief.
• Appeals: If you are appealing, the IRS is generally not allowed to issue levies during the course of the appeal (limited exceptions). Requesting a CDP appeal will stop the levy from moving forward, and the levy will not be able to proceed during any subsequent appeals as well. But if you request an equivelent hearing, that will not stop the levy. 
• Bankruptcy Filing: When you file for bankruptcy, an automatic stay is typically placed on most collection actions, including IRS tax levies. As long as the stay is effective, the IRS cannot garnish your Social Security payments.

Tax Resolution Options to Stop the IRS from Garnishing Social Security or to Release the Levy

The most effective way to stop a garnishment from moving forward is to make payment arrangements with the IRS. You do not have to wait until you receive a CP91 or CP298 Notice to contact the IRS to make payment arrangements. Ideally, you should do this as soon as possible after realizing that you have unpaid tax debt -- but if you've already received a notice, you need to act before the deadline. Here are the main payment/relief options.

Payment Plans -- IRS Installment Agreement

The IRS offers several different types of payment plans. Which payment plan you qualify for depends in large part on how much you owe and your ability to repay the tax. If you owe under $50,000 and can pay off the debt before it expires, you typically qualify for a simple payment plan. If you owe over that amount, look into a non-streamline agreement which may require a financial disclosure.

Partial Payment Installment Agreement

Another option to consider if you cannot make the minimum monthly payment plan on a regular payment plan is a Partial Payment Installment Agreement. This plan lets you make reduced monthly payments based on your ability to pay, which the IRS obtains from assessing your monthly income, expenses, as well as liabilities, and assets. The agency reviews your finances periodically to make sure you can't afford larger payments, and when you reach the debt expiration date, the remaining balance will be waived.

Offer in Compromise

An Offer-In-Compromise (OIC) allows you to settle your back taxes for less than you owe. Applying for and obtaining an OIC can be a complicated procedure. Generally, the IRS will accept an OIC where the amount offered meets their minimum payment requirements, and the taxpayer is current on all tax filing requirements.

Non-Collectible Status (Hardship)

Non-Collectible Status (CNC) is another option for you when the IRS is in the process of attempting to collect the taxes owed. To obtain CNC status, you will need to demonstrate financial hardship to the IRS. The IRS will look at your disposable income and assets to determine whether you can afford to make installment payments. If you are designated CNC, you will receive a tax deferment and stay from efforts to garnish your Social Security benefits.

Bankruptcy

If you have significant personal liabilities in addition to taxes owed, you may want to consider bankruptcy. Depending on the type of taxes owed, bankruptcy may be an option to deal with back taxes. If the taxes owed is more than three years old and the IRS assessed taxes at least 240 days before the filing of a bankruptcy case, the liabilities can generally be discharged. If you do not satisfy the requirements or are otherwise ineligible to file under chapter 7, it is possible to pay back taxes over a 3 to 5-year period with Chapter 13. Consult a bankruptcy attorney for more information in this situation.

All of these options will stop a Social Security levy from moving forward, but they also have the potential to stop an in-progress levy. But in that situation, you need to make sure the IRS is going to stop the levy. Before setting up payments, contact the agency or reach out to a tax professional. 

FAQs About Social Security Levies

Can you get Social Security if you owe back taxes?

Absolutely. Owing a debt to the IRS will not prevent you from signing up for Social Security benefits. However, if you know that you owe money to the IRS, make payment arrangements or secure hardship status as soon as possible. Then, you don't need to worry about putting your benefits at risk down the line.

Can the IRS garnish my Social Security if the SSA is already garnishing me?

Only if a revenue officer implements a manual levy, but you will not face an automated levy on your benefits if they're already being garnished by the Social Security Administration to cover overpayments by the agency.

Can the IRS garnish Social Security Disability Insurance (SSDI) payments?

Potentially yes. As of 2015, the IRS cannot garnish SSDI through the automated FPLP program, but the agency may be able to seize these payments through a manual levy. Although service-related disability payments are exempt from IRS seizure, SSDI payments may be subject to levy in rare situations.

Can the IRS seize Supplemental Security Income (SSI) for unpaid taxes?

No, the agency cannot seize SSI payments to the aged, disabled, or blind. These payments are based on financial need and are specifically exempt from IRS seizure.

Can the IRS seize my children's benefits for my unpaid taxes?

No, the IRS generally cannot seize children's survivors' benefits for unpaid taxes. Children's benefits come in the name of the child, not in the name of the parent. However, if those payments are in a bank account that you own, they may get indirectly levied through a bank levy. If that happens, consult with a tax professional to learn about your options.

Can the state seize my Social Security benefits for unpaid taxes?

Generally, no. Most state revenue agencies cannot seize Social Security payments for unpaid taxes, but they may be able to indirectly access those funds through a bank levy after they have been in your bank account for a certain amount of time. 

Get Help Now -- Protect Your Social Security Benefits

Dealing with unpaid taxes can be incredibly stressful, and you certainly don't want to put your monthly benefits at risk. To learn about your options and to get customized help for your situation, contact a tax professional today. Use TaxCure to find a pro who has the exact experience you need to solve your tax problems for good.