What Can I Do If The IRS Takes My Social Security?

23 Oct What Can I Do If The IRS Takes My Social Security?

When the IRS collects overdue tax from social security benefits it normally relies on the Federal Payment Levy Program. This automated collection program takes 15% of your benefit and redirects it to the IRS. The IRS first sends a notice to the delinquent taxpayer indicating a tax debt remains unpaid and warning that 15% of the social security benefit will be taken unless the taxpayer pays the tax or contacts the IRS about payment. If there is no response, an offset notice is sent to the Social Security Administration and the money will be deducted from benefit payments until the tax is paid or the levy is lifted. I have described this process and the manual levy that can take even more of the social security benefit in a previous article.

If you can not pay the tax, and a 15% reduction in the amount of your benefit check will cause a financial hardship, you have several options in order to prevent the levy. Regardless of the option you choose, it is important for you or a designated representative to contact the IRS before they start the levy.

Bankruptcy can be an option but credit counseling must first be completed and preparation of a bankruptcy petition takes time. The levy may already be in place by the time the case is filed and the IRS gets notice of the bankruptcy stay. For many types of tax, bankruptcy is only a temporary solution. If the tax is not discharged, the levy can be reimposed immediately after the bankruptcy case is closed.

It is critical to act quickly in order to preserve the benefit, someone must call the IRS within that 30 day period after the notice is sent. Be sure to check the date at the top of the letter because it could have been delayed in the mail. It can take several months to release a levy on social security benefits once it has begun. The last time I helped a client with a social security levy release, it took more than four months before he began receiving his full monthly benefit.

As I explain in my article on how to protect wages from the IRS after Bankruptcy, a lawyer with IRS collection experience can be very helpful in preventing IRS collection action even if a bankruptcy is not filed. However, you must act quickly if the IRS sends a notice of their intent to collect a past due tax from your social security benefit.If you fail to do so, the money will be lost and a benefit reduction will remain in place until the tax is paid.

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I was admitted to practice in 1978. I am certified as a Consumer Bankruptcy Specialist by the American Board of Certification. I regularly speak on tax and bankruptcy issues at state, regional and national conferences. Years of experience in practice before the Internal Revenue Service and Oregon Department of Revenue have given me the background to resolve a large variety of consumer tax issues.
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