Did you know the IRS has the authority to seize Social Security checks to satisfy outstanding tax liabilities? If you’re facing back tax debt, protecting your Social Security benefits from IRS seizure is a crucial step in tax debt resolution. 

But don’t panic – the IRS follows a specific process before taking action. Understanding the ins and outs of this process can help you prepare to navigate potential challenges and find a resolution before it’s too late.

Let’s explore the ins and outs of a federal tax levy, what to expect, and your best options in moving forward.

Federal Tax Levy: A Closer Look

A federal tax levy occurs when the government seizes a taxpayer’s property or rights to property to settle their tax debt. The IRS has a broad range of assets they can levy, including houses, cars, boats, wages, bank accounts, retirement accounts, rental income, and even social security benefits. However, before resorting to levying Social Security benefits, the IRS must go through a series of steps.

IRS Levy Notices and Social Security Benefits

The IRS initiates the levy process by sending a notice known as the Final Notice of Intent to Levy and Notice of Your Right to A Hearing. This notice is sent at least 30 days before the levy is placed on Social Security benefits. Ignoring this notice or having received a previous notice called CP 91 or CP 298, Final Notice Before Levy on Social Security Benefits, puts you at risk of having your benefits levied.

This 30-day waiting period gives you a final chance to resolve your tax debt or reach an agreement with the IRS. If no resolution is achieved within this period, the IRS proceeds with the levy on your Social Security benefits.

Determining the Amount the IRS Can Take

When the IRS levies Social Security benefits, they typically deduct 15% of your monthly benefit amount to apply toward your unpaid taxes. This deduction continues until your tax debt is fully paid or until you reach a resolution with the IRS. It’s important to note that regardless of the amount owed, the IRS can levy your Social Security benefits. While the first $750 of monthly benefits cannot be levied for non-tax debts, the IRS can take 15% of your benefits, even if they are less than $750, to satisfy tax debts.

Seeking Levy Removal

Once a levy has been placed on your Social Security benefits, there are specific conditions under which it can be released. These include paying the full tax debt amount, expiration of the 10-year Statute of Limitations for tax collection, demonstrating that releasing the levy will facilitate tax debt payment, entering into an Installment Agreement that includes levy release as a condition, proving financial hardship that prevents meeting basic living expenses, and showing that releasing the levy won’t hinder the IRS’s collection efforts. It’s worth mentioning that the IRS may reissue a levy if the underlying issue remains unresolved.

Options for Resolving Back Taxes

If your Social Security benefits are at risk of being levied, it’s essential to understand that contacting the Social Security Administration will not help resolve the tax issue. Instead, you should explore the resolution options provided by the IRS based on your tax debt amount and financial capacity.

Installment Agreements (IA) allow you to pay your tax debt in monthly installments when you are unable to make a lump sum payment. Offer in Compromise (OIC) provides an opportunity to reduce your tax debt if you can’t pay it in full, while Currently Not Collectible (CNC) status offers relief for taxpayers who are unable to pay their tax debt due to financial hardship.

In Conclusion

To safeguard your Social Security benefits from IRS seizure, taking prompt action when faced with tax debt is crucial. Responding to IRS notices and exploring their various payment options can help you avoid the potential loss of benefits. Tax debt tends to accumulate with penalties and interest, so early resolution efforts can save you from paying more in the long run. 

Our team of trusted and knowledgeable tax professionals is ready to help you navigate the sometimes stressful process of resolving your tax debt. We have helped 20,000 hardworking Americans do just that. Contact us today to schedule a consultation and take the first step toward financial freedom.

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