Can the IRS levy Social Security benefits?

Interruptions of their typical sources of income can have deep financial implications for a person. Among the things that could lead to a taxpayer facing such disruptions are federal tax troubles.

This is because one of the actions the Internal Revue Service sometimes takes in response to an unpaid tax debt is to initiate levies (seizures) against the taxpayer. This can not only include seizures of a taxpayer’s property, but seizures of income sources. Tax lawyers can provide guidance on responding to an IRS income source levy.

The range of income sources the IRS is allowed to levy in tax matters is wide. Social Security benefits are among the income sources that the agency can levy.

There are a couple caveats to this though. One is that taxpayers are allowed to claim an exemption amount when it comes to tax levies of Social Security benefits. Such an exemption can put a limit on how much of a Social Security payment the IRS ultimately can seize. Also, the IRS is not supposed to continue a levy of Social Security benefits if it inflicts economic hardship on the taxpayer.

A recent Treasury Inspector General for Tax Administration analysis, though, indicates that IRS agents don’t always follow these required caveats. In the analysis, the TIGTA reviewed a sample of IRS levies of Social Security payments. In over a quarter of the sample, the TIGTA found that the IRS used the wrong levy form. According to TIGTA, in a very small portion of the cases in which the wrong form was used, a Social Security levy ended up being issued that was higher than the amount allowed, taking into account the applicable exemption. Also, the TIGTA found that 15 percent of the levies from the overall sample likely caused or made worse a taxpayer economic hardship, raising questions as to whether those levies should have been continued. The TIGTA pointed to recent IRS policy changes as a possible contributor to this issue.

Among the things the TIGTA recommended in response to its findings was the IRS issuing guidelines to agents on Social Security benefit levies. The IRS has indicated that such guidelines are being planned. One wonders what impacts the guidelines, when ultimately issued, will have on IRS agent conduct regarding tax levies of Social Security benefits.

Source: Accounting Today, “IRS Tax Levies Caused Hardship for Social Security Recipients,” Michael Cohn, Aug. 3, 2016