Social Security checks are often a key part of a retiree’s budget — and missing out on some of that money can come as a surprise.
But it’s possible. For instance, the government can levy up to 15% of each check if someone has overdue federal taxes. The IRS will take money from your Social Security benefits before they land in your account. Paying off your taxes can solve this issue, but if that’s not an option, you still have options before the 15% levy starts.
What is the 15% Social Security levy?
A 15% levy is an additional reduction to your Social Security benefits on top of ordinary income tax and Medicare withholding. It applies to people who are in federal tax debt. Social Security is required to levy benefits if the court sends them a garnishment court order. The Treasury and IRS determine the levies that Social Security must impose.
This levy can have significant financial consequences for retirees. A $2,083 monthly Social Security benefit can lose $312 per month to the levy. That may force some retirees to return to work or pick up a side hustle to make ends meet and pay off their tax debt sooner.
Which Social Security payments can and can’t be touched
Not every type of Social Security payment is eligible for levies. The Social Security Handbook says that Supplemental Security Income, for instance, cannot be levied or garnished. Other forms of Social Security, including retirement and Social Security Disability Insurance (SSDI) benefits, are eligible for levies and garnishment.
Only the government can impose levies through the Treasury and IRS. Private creditors are generally not allowed to tamper with your Social Security benefits or obtain any amount of your Social Security checks.
What to do if you get a levy notice or your check is reduced
Levies don’t come out of nowhere. There is normally a trail of mail and messages leading up to a levy, so it’s a good idea to act upon a levy notice before your Social Security benefits get trimmed. You should start by contacting the IRS and verifying the debt to ensure it’s not a scam. During that call, you should ask about appeal rights and discuss payment options.
The three payment options are a payment plan, an offer in compromise or hardship status. Payment plans can make sense for people who can’t pay the entire amount right away but can navigate monthly payments over a determined timeframe.
An offer in compromise involves paying some of the amount due and having that counted as the full amount. It’s only for people who can demonstrate financial distress. Hardship status is for people who cannot keep up with basic living expenses if their benefits are levied, in which case, debt collection is paused until the person’s finances improve.
Throughout this process, the IRS will not demand payment via crypto, gift cards or similar alternative means through aggressive phone calls. That’s the route scammers sometimes take. Still, you have to contact the IRS about Social Security levies. A Social Security representative won’t be able to help you with federal tax debt levies.
