Social Security Levy
Social Security Levy
Tax issues rearing their ugly heads as you head into the end of your work career? The IRS can levy your Social Security benefits to satisfy a tax debt.
In July of 2000, the new Federal Payment Levy Program (“FPLP”) was enacted. This program allows the IRS to dip into various federally issued monies and benefits, including Social Security payments.The FPLP is an automated program with the IRS. There is also a manual (“non-FPLP”) levy process. Under the FPLP, the IRS is able to levy up to 15% of your Social Security Benefits each month; there is no similar restriction on how much the IRS can receive from the manual levy process.
The IRS levies on monthly Social Security payments may include retirement payments, survivor payments or disability insurance program payments. The IRS does not levy Social Security Payments for Children’s Benefits, Supplemental Security Income, or the Social Security Lump Sum Death Benefits. Additionally, other federal monies that you may receive, such as Federal employee retirement annuities, Federal payments, Federal employee travel advances or reimbursements, and some federal salaries may also be open for levies to satisfy federal tax debt.
If you owe money to the IRS, and you are receiving Social Security benefits from the Federal Old-Age and Survivors Trust Fund or Social Security Disability Insurance Benefits, the IRS can take up to15% of your monthly Social Security payment to satisfy your tax debt. All is not lost, however. There is a process that the IRS must follow and it is up to you to be proactive in this process.
If you are having a tax issue, the IRS must send you a “Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing”. If you receive this Notice, you will have thirty (30) days from the date on the notice to respond before the IRS will begin its collection actions. If you decide to do nothing and choose to not contact the IRS within those 30 days from the date on the “Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing”, the IRS will continue with its process, after the 30 days from the date on the notice has passed, and submit your levy to the Financial Management Service (“FMS”). The FMS controls your Social Security distribution. With the levy now on your case number, you will receive a notice indicating the amount of the levy and up to 15% of your Social Security distribution will be taken until your tax debt has been paid in full. The levy will remain in place until other arrangements are made, to the satisfaction of the IRS, or the tax debt is paid.
If you become subject to a levy, through a “Final Notice”, there are steps you can take to prevent having your payments levied. Some possibilities for relief from this federal tax debt are audit reconsideration and innocent spouse relief. If you never responded to an earlier IRS notice, the IRS may have assessed the tax liability based on assumptions from incomplete information they had at the time. You may ask the IRS to reconsider their assessment with your additional contributions to their information – a more complete audit of your tax situation.
Additionally, although an individual with a spouse is each responsible for paying the full amount of any tax, interest, and penalties due on a joint return, you may be relieved from the amounts due by your spouse – or, former spouse –that were incorrectly reported to the IRS on a joint return if you qualify for innocent spouse relief.
Remedies against a Social Security Levy are available if you act proactively. You need to come up with a plan that you will be successful with. You will need to determine what you will be able to do with your tax debt. Can you pay all of it or part of it? Following that determination, you need to talk to the IRS immediately. They may determine that you are unable to pay any of your tax debt due to economic hardship and, temporarily, delay the collection process until your financial condition improves. Be prepared to have proof of your monthly income and expenses as you work through your case with the IRS. The IRS may resolve your tax matter, if you are unable to pay your liability in fullby (1) entering into a monthly payment agreement, (2) entering an Offer of Compromise or (3) be classified as currently not collectible. With this last option, your tax debt does not go away; it is merely a determination by the IRS that you can not afford to pay your tax debt at this point in time. Being classified as “currently not collectible” ensures that penalties and interest will continue to be added to the debt.
Note: Taxpayers who are under a guardianship or a conservatorship situation due to incapacitation or other health & age issues will need to provide Power of Attorney to their handler in order to be able to talk to the IRS about tax problems. The IRS offers a Power of Attorney form to fill out.
Control your assets and your destiny by being proactive and acting quickly to prevent situations from escalating.