Can the IRS Garnish Your Social Security Benefits?
IRS Directly Garnishing Social Security
The IRS has the right to garnish your social security income (both retirement and disability) but limitations to this garnishment exist. First, you must receive at least $750/month in social security benefits. Second, assuming you are not receiving income from other sources (i.e. pension), the IRS will not garnish more that 15% under an automatic levy (garnishment) program. However, be aware that garnishments on social security could technically range from 15%-100% depending on your circumstances so it is best to speak with a tax attorney regarding your specific situation.
IRS Indirectly Garnishing Social Security
Suppose that your only income is derived from social security benefits, can the IRS indirectly garnish your benefits by levying your entire bank account instead? The answer is yes. According to Internal Revenue Manual 220.127.116.11, “[o]nce income is deposited in a bank, there is no exempt amount.” This means that in certain instances income is exempt from levy or garnishment for example, social security benefits not exceeding $750/month. However, no such exemption exists for money in a bank account – 100% of your bank account is fair game for the IRS to seize.
What If You Can’t Pay Your Bills Because of the Garnishment?
After a bank account is garnished, the bank holds the funds for 21 days before releasing it to the IRS. Should the garnishment cause economic hardship in that you’re not able to pay necessary living expenses such as rent, electricity, food, etc., the IRS will release the levy but the following steps must be taken:
1. Contact the IRS immediately after the levy takes hold and before the 21 day holding period expires; and
2. Provide a detailed financial statement to the IRS over the phone.
The IRS agent collecting your financial information will often times request “shut off” notices, “delinquency” paperwork, or eviction documents indicating that you are indeed experiencing an economic hardship – be prepared to provide them.
It is highly recommended that whenever your bank account has been seized and you are experiencing a hardship that you contact an experienced tax attorney to handle the matter. Without proper representation, you might unintentionally provide the IRS agent with unfavorable information which could negatively impact your chances of releasing your bank levy.
Michigan Tax Attorney Paul Tarnavsky has successfully released hundreds of bank garnishments and has helped thousands of clients resolve their IRS tax matters. Call him today at 248-398-0400 for a free consultation.