Can Social Security Benefits Be Garnished by the IRS?
Simply stated, yes. Social Security Retirement Benefits as well as Social Security Disability (SSDI) can both be garnished or levied by the IRS. Section 6334 (c) of the Internal Revenue Code allows Social Security Benefits and SSDI to be garnished to collect unpaid Federal Income Taxes.
The 15% Automated Levy
Typically, the IRS will only garnish 15% of such benefits. This means that if you receive $800 per month in Social Security income, then the most the IRS can garnish is $120 per month. This type of garnishment would be done under the Automated Federal Payment Levy Program (FPLP) – an automated process.
The 16%-100% Manual Levy
However, the IRS is not limited by the 15% levy under the FPLP. The IRS can choose a manual levy process. Under the manual levy, the IRS would consider your necessary monthly living expenses and then decide whether they could extract more than just the 15% from your social security benefits. For example, suppose that you receive $1,500 per month in Social Security and your necessary monthly living expenses are $950 per month (includes food, rent, and utilities). Under the FPLP, the IRS would only garnish 15% which amounts to $225 per month. Under the manual levy, the IRS would consider the difference between your benefits and expenses which, in this case, equals $550 ($1,500 – $950 = $550). In this scenario, the IRS would then levy your benefits at $550 per month.
Theoretically speaking, the IRS could garnish 100% of your Social Security Retirement Benefits under the manual levy. This would likely occur if you had other sources of income in addition to Social Security. Using the example from above, suppose that you received $950 per month in rental income in addition to the $1,500 in Social Security. The IRS would view the rental income as enough to pay you necessary monthly living expenses while the $1,500 is purely extra money which they could garnish 100%.
Although this is an extreme example, the point is to illustrate that the manual levy could vary anywhere from 16%-100% depending on your particular financial situation.
The Good News
First, the IRS’s ability to garnish Social Security Benefits is not unlimited. You must be receiving at least $750 per month or more. Those receiving less cannot have their benefits garnished. This obviously assumes that you are not receiving any additional income from any additional source.
Second, you will always have the opportunity to either release or prevent the garnishment by entering into an arrangement with the IRS. For a free consultation regarding your options in resolving or preventing an IRS garnishment, contact Tax Attorney Paul Tarnavsky of the Tarnavsky Tax Firm at 248-398-0400.
The Tarnavsky Tax Firm is a tax law firm located in the State of Michigan. The Tarnavsky Tax Firm specializes in all matters relating to taxation and is proud to serve its clients in nationwide.