Individuals with significant earnings can be vulnerable to liability lawsuits and other litigation that can put their incomes and savings on the line. In most cases, federal law protects Social Security benefits from seizure to satisfy such judgments. There are exceptions, however.
The Internal Revenue Service is unforgiving when you owe taxes, and it has the power of the federal government behind it to collect from you. It doesn't have to file a lawsuit against you first. Under the terms of the Federal Payment Levy Program, the IRS can take 15 percent of each of your Social Security benefit checks until such time as your tax debt is satisfied. If you owe money to any other government agency, your benefits might also be at risk, but the agency must leave at least $750 of your benefits untouched – the agency can seize the amount greater than $750. The IRS isn't subject to this rule, however, and it can garnish Social Security benefits payments for both delinquent taxes and for liabilities due in the current tax year.
No matter how much it might irk you to write a check to your ex each month, the government can garnish your Social Security benefits if you don't do so. Section 659 of Title 42 of the U.S. Code permits seizure of your benefits to satisfy court-ordered alimony and child support obligations, but this only occurs if you fall behind. Your own state's laws can affect how much the government can intercept. If your state's guidelines are less than those provided for under the Consumer Credit Protection Act, the CCPA applies instead. The CCPA allows the government to withhold 60 percent if your income does not support another child or family. It can take 65 percent if you're 12 weeks or more behind in your payments.
Civil Penalties and Restitution
Civil penalties or court-ordered restitution can also affect your Social Security benefits. Civil penalties include things like surcharges for traffic violations or government-levied fines, such as if you're charged with lighting a bonfire in your backyard to celebrate Halloween when bonfires are against city ordinance. Liability lawsuits and some criminal lawsuits can result in victim restitution payments, and Section 3612 of Title 18 of the U.S. Code allows the government to garnish these sums from Social Security benefits as well if you don't voluntarily pay.
Supplemental Security Income is invariably exempt from garnishment, and other types of Social Security benefits are sometimes safe as well. The government can't take death benefits paid in one installment for tax purposes, nor can it touch benefits paid to children. No one other than the government can intercept or garnish your benefits. If a lawsuit results in a monetary judgment, the plaintiff must look to your other assets for collection.
Beverly Bird has been writing professionally for over 30 years. She specializes in personal finance and w, bankruptcy, and she writes as the tax expert for The Balance.