Many people who receive Social Security Income (SSI) wonder, “Can the IRS take my SSI income to pay my tax debts?” While there is some confusion on this matter, the short answer is no—the IRS cannot levy your SSI income to repay your back taxes.
However, that does not mean that the IRS cannot take other benefits from the Social Security Administration. When you fail to make federal tax payments or repay tax debts on your own accord, the IRS may begin withholding some of the income you receive from the federal government to pay back your debt. The IRS withholds this money through the Federal Payment Levy Program.
Understanding what benefits the IRS can and cannot take to repay your tax debt can help you know what income you receive is subject to this repayment program. Read on to learn more about the Federal Payment Levy Program and the impact it can have on your Social Security Income and benefits.
What Is the Federal Payment Levy Program?
The Federal Payment Levy Program (FPLP) is a government program that allows the IRS to collect overdue taxes by levying specific federal payments through the Bureau of Fiscal Service.
Let’s say that you have significant tax debt and have not made any payments. The IRS has requested the money from you several times and informed you about its tax relief programs, yet you have not taken any action to relieve your tax debt.
Eventually, the IRS may begin paying your overdue taxes for you by taking money out of your federal payments, such as your:
● Federal employee retirement annuities
● Social Security benefits
● Medicare payments
● Military retirement payments
The IRS can reduce the income you receive through these benefits, taking a certain percentage each month to repay your tax debt.
SSI vs. Social Security Benefits: Can the IRS Take Both?
Many people confuse SSI with Social Security benefits, especially when it comes to which payments the IRS can take to garnish tax debt. However, these two programs are not the same.
Supplemental Security Income, or SSI, is a government program that provides cash payments to older adults, people with disabilities, and individuals with little or no income. The Social Security Administration administers these benefits to individuals based on need and does not consider prior work experience when determining eligibility.
As of 2021, the IRS cannot levy SSI payments through the Federal Payment Levy Program. SSI payments are one of the few exclusions from this program. As a result, if you receive SSI payments, you do not have to worry about the IRS garnishing them for your tax debt through the FPLP.
In contrast, Social Security benefits are available to individuals who worked for a minimum amount of time and paid Social Security taxes. This program provides partial replacement income for disabled individuals and retirees, and the benefits it offers depend on an individual’s age and earnings history.
Unlike SSI, Social Security benefits are subject to IRS garnishment. If you fail to pay back your tax debt or apply for a tax recovery program after multiple IRS notices, the IRS may begin levying your Social Security benefits to pay for the debt you owe.
How Much of My Social Security Benefits Can the IRS Take?
The IRS can reduce your Social Security benefits by up to 15% to pay back your tax debt. Before 1996, the IRS had to leave at least $750 of Social Security benefits untouched each month. However, with the Federal Payment Levy Program, there is currently no “off-limits” amount that the IRS cannot take, granted that the amount does not exceed 15% of the monthly payment.
Will the IRS Warn Me Before Taking My Social Security Benefits?
The IRS will not just begin taking money out of your Social Security benefits without your knowledge.
First, the IRS will send you a letter detailing its intent to levy and notifying you of your appeal rights. If you do not respond, you will be sent another letter explaining that the IRS may levy your Social Security benefits. This letter will give you 30 days to respond and make arrangements to repay your tax debt.
If you do not make some effort to repay your unpaid taxes within these 30 days, the IRS will begin deducting 15% from your Social Security benefits.
Need Help Settling Your Tax Debt?
If you receive SSI benefits, rest assured that the IRS cannot take any of these payments through the FPLP to pay back your tax debt. However, this does not apply to your Social Security benefits.
Facing an IRS levy or garnishment can be stressful. If you owe significant tax debt and have received a final notice of intent to levy, we can help you identify the best way to repay your taxes quickly and efficiently.
Contact Levy & Associates today to speak with our tax resolution professionals. We can help you explore options to address the levy on your Social Security benefits and settle your tax debt.