Introduction
Social Security benefits are of enormous significance to millions of Americans, especially retirees and persons with disabilities. But if you owe back taxes or have other money problems with the IRS, can they seize your Social Security payments to pay off those debts?
The short answer is yes—the IRS can take some of your Social Security benefits, but only in certain circumstances. Let’s break down how this works, what protections you have, and how to avoid or stop the IRS from seizing your benefits.
Also read this Article, Social Security to Tax Savings – Top 5 Tax Breaks for 50+
Key Takeaways
- Automatic Levy: The IRS can seize 15% of Social Security benefits through an automatic system.
- Manual Levy: The IRS can take even more through a manual levy, including Social Security retirement, survivor’s benefits, and disability payments.
- Final Intent to Levy Notice: The IRS must give you a 30-day warning before taking your Social Security benefits.
- Collection Due Process Hearing: If you want to avoid the levy, you can request a hearing to discuss your options.
- How to Avoid It: Set up a payment plan, apply for an offer in compromise, or get on currently uncollectable status.
- How to Stop It: You can stop a levy if it createsfinancial hardship or was issued incorrectly.
Check your Social Security Levy and Pay the Correct amount – Social Security Quick Calculator
Can the IRS Seize Social Security Benefits?
The IRS can legally take money from your Social Security payments if you owe back taxes or other federal debts. But there are some pretty strict rules and protections out there. In most cases, the IRS can take a portion of your Social Security payments; however, they cannot grab all of it. Let’s dive into how that works.
Automatic Levy on Social Security Payments
The IRS uses an automated system to collect back taxes from individuals with outstanding tax debts. This is called an automatic levy, and it typically applies to Social Security retirement and survivors’ benefits. Under this system, the IRS can take up to 15% of your Social Security benefits to pay off your tax debt.
The automatic levy is a process where the IRS directly seizes a portion of your Social Security benefits without going through court procedures or manual intervention. While this might not take all your benefits, it can still leave you with a reduced income.
Manual Levy on Social Security Payments
In some cases, the IRS may issue a manual levy. This is more serious and involves a deeper level of intervention. Under a manual levy, the IRS can take funds from a variety of government benefits, including:
- Social Security retirement benefits
- Survivor’s benefits
- Disability payments
A manual levy is more flexible than an automatic one and can sometimes take more than 15% of your Social Security payments, depending on your circumstances.
Final Intent to Levy Notice
Before the IRS can take any money from your Social Security payments, they must send you a Final Intent to Levy Notice. This notice is your official warning that the IRS intends to begin seizing your benefits. You will receive this notice at least 30 days before any seizure action occurs.
The notice will include important information, such as:
- The amount of debt you owe.
- The type of levy the IRS is considering.
- Instructions on how to prevent or stop the levy.
The 30-day period allows you to act by paying your debt, negotiating with the IRS, or setting up a payment plan.
When you ignore the notice, the IRS—Collection Due Process Hearing can initiate the levy.
If you don’t agree with the levy or want to explore alternatives, you can request a Collection Due Process (CDP) hearing. This hearing allows you to speak directly with the IRS about your financial situation and discuss your options.
You can request a CDP hearing by calling the IRS or submitting a written request. However, you must act within 30 days of receiving the Final Intent to Levy Notice. At this hearing, you can:
- Provide evidence of your financial hardship.
- Request an installment payment plan.
- Apply for an offer in compromise (more on that below).
During this hearing, you may be able to find a way to prevent the IRS from taking your Social Security payments or reduce the amount they are taking.
How to Avoid Having Your Social Security Benefits Seized
If you’re behind on your taxes but want to avoid having your Social Security benefits taken, there are several options available to you:
- Set up a Payment Plan: You can arrange a monthly payment plan with the IRS to pay off your debt gradually. If the IRS agrees to a plan, they may stop the levy or reduce the amount they seize from your Social Security benefits.
- Offer in Compromise (OIC): An Offer in Compromise is a settlement with the IRS where you agree to pay a reduced amount to clear your debt. If you qualify for an OIC, the IRS might accept a smaller payment than the full amount owed and cancel the levy on your benefits.
3. Currently Not Collectible Status: If you prove that repaying your tax liability will destroy your finances.
You may qualify for Currently Not Collectible (CNC) status. This status temporarily suspends IRS collection actions, including levies, until your financial situation improves.
Know more about Fair Taxes, Fair Society: A Simple Breakdown of Progressive Tax System
How to Stop an IRS Levy on Social Security Payments
If the IRS has already started taking money from your Social Security payments, there are still ways to stop it. Here are some options:
- Prove Financial Hardship: If the levy is causing severe financial hardship (for example, if you can’t afford basic living expenses), you may be able to stop the levy by showing the IRS that it is causing you financial distress. This is often done through a formal request or during a Collection Due Process hearing.
- Challenge the Levy: If you believe the IRS issued the levy incorrectly—perhaps because of an error in your tax records or account—you can challenge it. If you can show that the levy was a mistake, the IRS must stop it.
- Negotiate a Different Solution: If you’re facing a levy, consider negotiating a more manageable payment plan or applying for other relief programs that might prevent the IRS from continuing the levy.
Final Thoughts
The IRS can seize some of your Social Security payments if you owe back taxes, but they must follow a process and warn you before taking action. If you’re facing the possibility of a levy, you do have options. You can request a hearing, set up a payment plan, or apply for programs that reduce or stop the levy.
Keep in mind that you arise on the hook for any tax debt. If you get a Final Intent to Levy Notice, don’t blow it off. Hit up the IRS or talk to a tax pro about what you can do. If you catch it early, you will save your Social Security benefits and avoid severe money trouble.
Remember, Social Security is there to help you in your retirement or during times of disability—don’t let unpaid taxes take away your peace of mind.
Check your Social Security Levy and Pay the Correct amount – Social Security Quick Calculator
