12 / 01 / 11

Can the IRS Take Your Social Security?

Yes. The IRS can take your Social Security to satisfy a tax debt.

In fact, in July 2000, not only did the new Federal Payment Levy Program allow the IRS to dip into some Social Benefits paid to you, but it can also money that you've received from:

  • 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,
  • Some federal salaries.

You Could See a 15% Cut In Your Social Security

If you owe money to the IRS, and you are receiving Social Security benefits due to:

  • Federal Old-Age and Survivors Trust Fund (or)
  • Disability Insurance Benefits

The IRS can take 15% of your Social Security payments to satisfy your tax debt.

Prior to 1996, there was a $750/month "off limits" amount that had to be left for the Social Security recipient.

However, that changed with the introduction of the Federal Payment Levy Program, which allowed for 15% of the total monthly payment to be collected - regardless of the amount.

However, benefit payments such as lump sum death benefits, benefits paid to children are not eligible. Additionally, Supplemental Security Income (SSI) payments, under Title XVI, and payments with partial withholding to repay a debt owed to Social Security will not be levied through the Federal Payment Levy Program.

How To Know if Your Social Security is About To Be Tapped by the IRS

The IRS must send you a "Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing" form. At this point you'll have 30 days to respond

You have a few choices at this point - you can either:

  • Pay the tax
  • Negotiate an alternative payment method (payment plan, partial payment plan, Offer-in-Compromise)
  • Be declared non-collectible (hardship) status
  • File for an appeal
  • Ignore the Warning and do nothing

If you decide to do nothing and you don't contact the IRS, after 30 days they will submit your levy to the Financial Management Service (FMS) and 15% of your Social Security will begin to be taken to satisfy your tax debt.

The levy will remain in effect until the tax is paid off, or until you make other arrangements.

Don't Let the IRS Take Your Livelihood

If you're counting on Social Security benefits to live, you can't afford for the IRS just to waltz in and take 15% of your livelihood without a fight.

Depending on your situation, you may be able to qualify for a Offer-In-Compromise and end up paying the IRS significantly less than you owe. However, be forewarned - the IRS only accepted 16% of Offers-in-Compromise in the year 2006. To increase your chances of having your offer accepted, it would be a very good idea to have your paperwork prepared by a competent tax attorney.