After a lifetime of working, the money you receive in Social Security retirement benefits is a welcome addition to your monthly budget. But if it looks like you’re coming up short each month because of unpaid Social Security benefits, it’s possible that a percentage of this retirement income has been earmarked for paying a past-due tax debt. You won't be blindsided by this, because the IRS must give you fair warning before taking action.
Although the IRS cannot prevent you from receiving your full Social Security income, it can levy up to 15 percent of your retirement benefits each month to satisfy any outstanding tax debt that you owe.
Social Security Income Garnishment
As the largest bureau in the U.S. Department of the Treasury, the Internal Revenue Service is the national tax collection agency. And although the IRS and Social Security Administration are different entities, they work together in resolving tax debts. If you have a past-due tax debt, the IRS will contact you by sending a tax bill and a notice of their intent to levy your Social Security retirement income.
If you do not respond within the requested time frame in this notice, the IRS will send another notice titled "Final Notice of Intent to Levy and Notice of Your Right to a Hearing." If you or your attorney fails to respond to this final notice, the IRS can begin to garnish your Social Security income each month.
IRS Levy Exceptions
In some cases, you can prevent an IRS levy against your Social Security income. First, contact the IRS and try to work out a monthly installment payback plan. If you're unable to pay your tax debt in full, the IRS may extend an offer of compromise, in which they agree to settle your debt for less than you actually owe.
Another option is to ask the IRS if it would classify you as “currently not collectible.” This classification doesn’t excuse your tax debt; in fact, interest and penalties continue to accrue, but the IRS simply determines that you’re currently unable to pay your debt. Although the IRS can levy Social Security retirement, survivors and disability insurance payments, it cannot levy children's benefits, Supplemental Security Income or lump-sum death benefits.
No Changes From 2017 to 2018
The 2018 tax year, for which you’ll file your tax return in 2019, saw no changes in the IRS 15-percent levy from the previous tax year. If your Social Security benefits are levied, the IRS can continue to withhold up to 15 percent of your retirement income until the debt is satisfied in full or unless the IRS agrees to another repayment arrangement.
Victoria Lee Blackstone was formerly with Freddie Mac’s mortgage acquisition department, where she funded multi-million-dollar loan pools for primary lending institutions, worked on a mortgage fraud task force and wrote the convertible ARM section of the company’s policies and procedures manual. Currently, Blackstone is a professional writer with expertise in the fields of mortgage, finance, budgeting and tax. She is the author of more than 2,000 published works for newspapers, magazines, online publications and individual clients.