Owing the IRS is likely to give you nightmares when you can't find the money to settle your debt. The IRS has a legal right to collect taxes that you owe to the government and has multiple ways to collect what you owe. Ignoring your tax debt will put you in-the-crosshairs for collection actions. If you ignore your tax debt, when you become eligible to receive Social Security payments, the IRS might come calling.
IRS Levy Procedures
The IRS handles different types of Social Security payments using different procedures. The IRS uses the Federal Payment Levy Program to collect tax debt from Social Security benefits recipients. You will receive a notification from the IRS of its intent to collect your debt through this method 30 days before it happens. During this time, if you enter into a payment agreement with the IRS, your Social Security benefits won't be levied. If you don't respond to the first notice of intent, the IRS sends a final notice before the levy goes into effect. If you don't have an approved payment plan, the Social Security Administration will start deducting a specific amount of money from your monthly benefits before you receive them.
Collection Rules for Social Security Retirement Payments
Social Security benefit payments come from your account that you and your employers contributed to while you were working, officially called the Title II — Federal Old-Age, Survivors and Disability Insurance Benefits fund. Social Security payments that you can receive from this fund include not only your retirement benefits, but also disability benefits and benefits for surviving minor children. You can access your Social Security retirement benefits from this fund at age 62 for early retirement, or wait until you reach the full retirement age. This age now varies according to the year of your birth. The IRS has the right to levy your benefits that the government pays you from this fund, if you haven't made a payment arrangement for your tax debt. The maximum allowable IRS levy of these benefits is 15 percent of your benefit amount per month. The levy continues until you have cleared your tax debt.
Social Security Survivors Benefits
The Social Security benefit for children who have lost an eligible parent has different rules. The Social Security Administration sends this payment to an adult who is either the surviving parent or the child's guardian. However, the child is the benefit recipient, not the adult. Therefore, the IRS does not include these payments in the Federal Payment Levy Program. The IRS also excludes the lump sum Social Security death benefit from its levy actions.
When you receive a notification of intent to levy from the IRS, you will also receive information about your right to appeal before the levy takes place. The IRS provides full instruction for appeals in its downloadable "Publication 1660, Collection Appeal Rights." To appeal, send a written request to the appeals office address that the IRS provides when it sends your levy notice. Your request must include a valid reason for protesting the IRS levy. Some commonly accepted reasons include the miscalculation of amounts sent as payment, or refusal of an "offer in compromise," which is a petition to the IRS to accept less than the amount you owe to settle your tax arrears.
- Internal Revenue Service: Social Security Benefits Eligible for the Federal Payment Levy Program
- Federal Trade Commission: Consumer Information Garnishing Federal Benefits
- Internal Revenue Service: Publication 1660,Collection Appeal Rights
- Internal Revenue Service: Requesting an Appeal
- Internal Revenue Service: Topic Number 204 - Offers In Compromise