Can the IRS Garnish Social Security?


There is a lot of confusion when it comes to this topic.

Most creditors cannot garnish federal benefits. This includes social security benefits. The federal government has a different set of rules than most creditors. Only the federal government can garnish your social security and other federal benefits.

Throughout my time in this industry, I have absolutely received more phone calls from people on social security being garnished than garnishments on regular income and many others in my industry will say the same.

The only explanation is that it is an easy form of garnishment because it is government to government. Another big confusion when it comes to social security is that it is nontaxable. This is true in some cases but if there is additional income then social security can become taxable.

No taxpayer regardless of additional income has all of their social security taxed.

It is either zero, 50% or 85%. If you have income between $25,000 and $34000 you may have to pay tax on up to 50% of your benefits. If you have more than $34,000 up to 85% of your benefits may be taxable.

These two confusions can lead to some major tax problems.

I have dealt with many clients that because of these confusions were being garnished 15% of their social security check when they were already living in a tight financial situation. Many of these cases call in for help and they didn’t even know that they owed a tax debt or that they were even required to file.

I can think of one client that was completely blindsided by the IRS garnishment.

She also went a good amount of time without realizing that it was happening because she never received any notice from the IRS of not only the garnishment but never received notice that she actually owed a debt. Out of respect for her privacy, we will call her Ms. J.

Ms. J was a widow whose husband had died about 8 years back. Her had handled most of the bills and had always handled the yearly tax filing. She was left with a little savings and a pension from her deceased husband. She was 76 years old so at this point in her life she was retired and just receiving social security and this pension.

Her confusion and listening to people who were not tax professionals led her to the assumption that because she was retired and on social security, she did not have to file taxes.

Over these many years as her savings was being depleted, she downgraded her rental situations a few times moving from a rented home to a cheaper senior’s apartment.

Since she had moved since the last time that her husband had filed taxes the IRS no longer had her correct address. So, years went by, and she never heard anything, so she just figured her assumptions about filing were correct.

As her savings were depleting, she was becoming more dependent on the income she was receiving from her social security and the pension. She then started noticing that her social security deposit was smaller than it had been in the past.

When she received her statement, she saw that the IRS had been taking $270 monthly out of the $1800 that she normally receives. She said she began calling them but could never get through. She said she felt helpless and gave up but after a few months of trying.

Luckily a friend of hers had been a client of ours in the past and recommended that she give us a call. We knew we could help her, but we had to get some answers for her from the IRS first.

Tax Investigation

Ms. J was very excited to finally get some answers because at this stage she had no idea how much she owed or even how she owed it.

We had a good idea of what had happened because we had seen cases like this in the past, but every case is different, so we definitely wanted to get all of her information from the IRS and strategize using the facts. Within about a week we had all of her information from the IRS.

The IRS had been up to a lot in the background that she was unaware of.

It turns out that she should have been filing her taxes all of these years. If she was just receiving her social security, she would not have been required to file but since she was receiving the pension that totaled $24,000 for the year on top of that the social security had become taxable.

To make matters worse she had no withholdings set up on the social security or the pension.

After a few years of not filing these taxes, the IRS had begun filing missing years on her behalf. They had completed 3 substitutes for returns and still had 5 years that were unfiled that the IRS was looking for.

At this point the IRS had her owing a little over $37,000 for the three years filed with penalties, fees and interest. They had been garnishing her social security check for almost the whole past year and had taken a total of $2700 from her. The bad thing was that all of this had gone directly to penalties and interest.

people talking

The Resolution

The first step in her case would be to get her compliant with her filing requirements.

Our Enrolled Agents were able to convince the IRS to allow a temporary hold on the garnishment while we filed these years. Typically, the IRS will never release a garnishment, so this was definitely a gift.

We filed these years and because of the lack of the lack of withholdings she owed a significant amount more. The IRS took a few months to assess these filings, but they kept that hold on the garnishment while they did this. Once the filings were all assessed Ms. J owed about $70,000 altogether.

At first, she was horrified to be owing this much. She had gone from a few months ago thinking that she was not required to file head on into a major situation with the IRS.

At this point we already had a plan in place of how we were going to help her resolve her tax debt. Since she was now compliant with her filings, she had a lot of rights when it comes to owing the tax debt.

The next step was proving her ability to pay the debt back.

The first thing that needed to be done is that she had to fix her withholdings with her social security and the pension that she had. This would do two things.

First of all, it would stop her from owing any further tax debt. The programs that company of our nature utilize have a lot of benefits and savings, so they are one time get of debt programs. Also, present year tax debt is an expense that she has a right to pay prior to paying back taxes so paying these taxes first will lower her payment on the older debt.

After this we were able to show all other allowable expenses, and this gave us the ability to negotiate a very small payment for her. She would only be required to pay $25 a month. Since the is a statute of limitations on tax debt she will only end up paying back around $3000 on the $70,0000 that she owes.

Ms. J was very excited to say the least. She came to us not having a clue what was happening or how she could possibly owe the IRS and now she had an end date to everything.

Also, the garnishment was released and she was paying her very small payment that helped her afford all of her other allowable expenses. If you have not filed taxes out of fear that you will owe the IRS money that you don’t have, contact us for a free tax consultation.

Let’s see how we can help you resolve your situation so you can stop worrying about the IRS.

An Introduction to IRS Garnishment

woman upset reading an IRS garnishment notice

If you owe back taxes to the IRS, the government can garnish your wages to pay the debt. An IRS garnishment can come without warning, so being prepared is a must.

No one wants to owe money to the government, especially if it’s a large amount. But it happens more than you think. Unfortunately, due to varying circumstances, many individuals find themselves in this predicament and aren’t aware of the correct procedures to get out. The best thing to do is pay off the debt as soon as possible, and yes, a garnishment may be on the horizon. But it doesn’t mean it can’t be avoided.


What is an IRS Garnishment?

An IRS Garnishment is a procedure where wages are taken from your paycheck, bank account, or other financial accounts to pay a tax debt. The garnishment is based on how much you make, the size of the debt, and how many other garnished payments are being implemented during each pay term. However, the only other garnishments in consideration are other government-related transactions.

The IRS also has the right to seize property if a paycheck isn’t available for garnishment. There is more than one way to retrieve IRS debt, but there are rules the agency must follow to levy these funds. The IRS cannot just start garnishment on a whim, neither can they seize property without warning. There’s a process with steps the government must follow.

As stated above, the IRS cannot immediately start a garnishment or levy without ample warning. If you understand how the garnishment works, you can possibly stop the procedure, or at least challenge the terms of the garnishment.


The Process Before an IRS garnishment

When a tax debt is assessed by the government, a notice for Demand of Payment is sent to the debtor. After additional attempts are made to retrieve the money from the debt, including multiple collection letters, the IRS will consider garnishment or even levying for the owed taxes. 

The Final Notice of Intent to Garnish Wages is sent to the debtor. When this final notice is received, the debtor then has the right to a hearing to contest the retrieval of back taxes. Yes, you can challenge the call for IRS payment, but it’s not recommended.


How Much Can the IRS Garnish?

Yes, the IRS can only garnish a certain amount from your paycheck but it’s not subject to the same limitations as other establishments like collections agencies, which are drastically limited. Limits on how much the IRS can take are few.

For instance, you can be left with little money to live on if the IRS decides to garnish your check. This could mean taking home $500 of a $1000 paycheck. And if the paycheck is for $2000, it still means you could possibly only take home $500 to make ends meet.

This amount is usually determined by how many dependents you have and your standard deduction. IRS garnishment can be harsh. But that depends on how much money you owe in back taxes. 

Also, one other stipulation that governs how much the IRS garnishes from a paycheck is child support. If this type of government support garnishment is already coming from your paycheck, it could reduce the IRS back tax garnishment, and even give you a small break.


What Can the IRS Garnish and Take?

Technically, garnishment means taking a portion of your wages from your weekly or bi-weekly paycheck. However, the government also has the right to take from bank accounts and financial institutions. They can also levy and sell automobiles, real estate, and any other recognized personal property that holds value for the debtor. When the government is owed money from previous unpaid taxes, they use most means necessary to collect a debt.

The IRS can also levy any property in which you have interest, such as property kept by someone else but still listed in your name. If you think the government cannot touch certain accounts you own, you’re wrong. The IRS can also levy retirement accounts, dividends, rental income, commissions, and even take the loan value of your life insurance as payment. 


Can the IRS Garnish Social Security Payments?

Never be under the impression that your social security or social security disability check cannot be garnished by the government because it can. Your social security benefit is subject to garnishment as just as any other check, but there are limits to what the government can take. In the 90s, a law stated that the government could only garnish social security benefits reaching over $750, but laws often change. 

In 2002, a new law was passed stating that only 15% of social security monthly benefits could be garnished to satisfy a back tax debt. 

Unlike previous laws about social security benefits that stated only amounts over $750 could be garnished, now, regardless of the amount, 15% of checks can be garnished. Yes, this can leave individuals with little money to survive, but considering social security benefits are government payments, it’s the right of the IRS to collect a debt one way or the other until the debt is satisfied.


What You Should Do Before a Garnishment Happens

The first question to ask yourself is “Do I really owe these back taxes?”, or “Did someone make a miscalculation?” Getting information about how the back taxes are calculated is important. There is always room for error, even with the internal revenue service. 

There is also a statute of limitations on how long taxes are owed and must be repaid. Understanding this is important as well. Making calls as soon as you get the first notice is the best way to handle the situation. If you don’t understand why the IRS wishes to collect a debt, then you’re more prone to fight the debt.

If you know you owe the money to the government, never try to take the case to court. This isn’t just about moral issues, it’s because you probably will not win the case if you’re dishonest. The IRS keeps impeccable records of past filed tax returns and non-payments, with vast amounts of information at their fingertips. Although the IRS must send all notices at least 30 days before attempting garnishment, it’s best to pay your debt by working with the agency itself. Avoiding tax evasion and paying what you owe is simpler than fighting for government money.

Chances are, the IRS has the facts you’re trying to avoid, but they are willing to help smooth things out. The government will work with you on an installment plan in most circumstances, so garnishment should always be a last resort. 

One good thing about how the IRS works is that they give multiple chances to pay a debt. Along with a direct notification, the internal revenue service sometimes offers settlements of a lower price to satisfy debts quickly. This is seen many times with large debts, or payments in which the debtor has a hard time collecting the money. It’s even a possibility for those with disabilities. If you do choose to ask for a settlement, you will need to provide proof of your financial need.


Can You Appeal a Garnishment?

It is possible to appeal the garnishment, even after the 30 days notice from the government. However, most of the time, the appeal process works to stop garnishments when the IRS hasn’t followed through with proper procedures beforehand. If you can prove that the IRS hasn’t followed protocol, it’s the best chance, maybe the only chance of winning your case. Here are the only circumstances where this could happen:

  • When filing bankruptcy
  • If not given 30 days’ notice
  • An installment plan is discussed during the appeals process
  • When the expiration of the tax collection period is passed

Even though these options may relieve you of tax debt, it’s still best to pay what you owe to the government. Sometimes these maneuvers can backfire leading to the discovery of even more unpaid tax debts from the past.


How to Stop an IRS Garnishment

You can stop an IRS garnishment before it takes place. Even if the back taxes are piling up, you can find the best solution by working with the government and not against the agency. Fighting in court, in most opinions, is not the best idea.

It’s always good to find a resolution with the IRS to pay your debt off efficiently, and with little struggle on your part as well. After all, no one wants to lose half or over half of their paychecks every week, nor do they want to endure property seizure. Sometimes, only a professional can help with these types of situations. 

Contact Innovative Tax Relief to discover the best avenue for paying off your back taxes. Tax negotiations, installment plans, and compromise are better than an IRS garnishment. Why not face the problem, find a solution, and quickly clear your record from any past tax debt?