The IRS Is Taking Your Social Security: How to Stop It

Your Social Security deposit is smaller than it should be, or you just opened a CP91 that says the IRS intends to take up to 15% of your benefits. For many retirees, that check is the whole budget. Losing part of it every month is frightening.

Here is the good news. The IRS has a specific process for Social Security levies, and the Internal Revenue Code also requires the IRS to release a levy in certain situations, including when it leaves you unable to pay basic living expenses. Here is how it works and what I would do right now.

How the IRS levies Social Security

Most Social Security levies run through the Federal Payment Levy Program, an automated system that matches IRS balance-due accounts against federal payments processed by the Treasury's Bureau of the Fiscal Service. Section 6331(h) of the Internal Revenue Code allows a continuous levy on "specified payments," and it limits that levy to up to 15% of each payment. Once it starts, it repeats every month until it is released.

Normally you hear about this before it happens. Under Section 6330, the IRS must send a notice of your right to a Collection Due Process hearing before it levies. In this program that notice is often a CP90, though an earlier LT11 or Letter 1058 can also serve. When the match identifies Social Security benefits, the Internal Revenue Manual (IRM 5.11.7) says the IRS sends one more warning: a CP91 for individuals (CP298 for business accounts), titled "Intent to seize up to 15% of your Social Security benefits." It goes by regular mail and, according to the manual, provides an additional 30 days to resolve the balance.

Ignoring those letters is what turns a warning into a smaller deposit.

Which benefits can be levied, and which cannot

Many people assume Social Security is untouchable. For most creditors it largely is. The IRS is different. Section 6334(c) says that, notwithstanding any other federal law, including the anti-assignment provision in section 207 of the Social Security Act, only the property listed in Section 6334(a) is exempt from IRS levy. Regular Social Security retirement and survivor benefits are not on that list.

Some benefits are protected:

• Supplemental Security Income (SSI). Section 6334(a)(11) exempts public assistance under title XVI of the Social Security Act, which is SSI. The IRS manual also states that SSI is not subject to the automated levy program.
• Other needs-based payments. Section 6331(h)(2)(A) excludes from the automated program any federal payment where eligibility is based on the payee's income or assets.
• Payments the program does not reach. IRM 5.11.7 lists exceptions within Social Security for disability insurance payments, dependent child benefits, lump-sum payments, and payments already being partly withheld to repay a Social Security overpayment.

The manual also describes a low income filter: individuals whose Social Security, military retirement or railroad retirement benefits are matched are excluded from the program if their estimated total income is below 250% of the federal poverty guidelines. There are exceptions, including unfiled returns, so do not assume the filter protects you.

One caution. The IRS can also levy Social Security with a paper notice of levy, outside the automated program. The manual says a CP91 is not required before a paper levy. Different rules apply to how much a paper levy takes, so if you receive one, get advice quickly.

What to do right now

1. Find every IRS letter. Look for a CP90, CP91, LT11 or Letter 1058. Note the dates. The date of the CDP notice controls your hearing rights.
2. Check your hearing deadline. If the CDP notice is less than 30 days old, file Form 12153 to request a Collection Due Process hearing. Under Section 6330(e), a timely request suspends the levy while the hearing is pending. If more than 30 days have passed but less than one year, you can still request an equivalent hearing under Treasury Regulation 301.6330-1, though the IRS is not required to stop collection while it is pending. See your 30 days after a final notice of intent to levy.
3. Ask for a hardship release. Section 6343(a)(1)(D) requires the IRS to release a levy that is creating an economic hardship. Treasury Regulation 301.6343-1(b)(4) defines that as a levy that leaves an individual unable to pay reasonable basic living expenses, considering food, housing, utilities, medical costs, transportation and similar needs. Be ready to document your income and expenses, usually on an IRS collection information statement. The regulation also requires good faith, so full and accurate disclosure matters.
4. Propose a resolution. Section 6343(a)(1)(C) requires release once you enter an installment agreement under Section 6159, unless the agreement provides otherwise. Section 6331(k) generally bars new levies while an installment agreement request or an offer in compromise is pending. If you truly cannot pay anything, ask whether your account can be reported as currently not collectible.
5. Move fast because of payment cutoffs. The IRS manual explains that a release must post before a processing cutoff, about six business days before a Social Security payment date. A release granted just before your payment date may not save that month's deposit. Call the number on your CP91 as soon as you can.
6. Get the Taxpayer Advocate involved if the IRS is not responding. If the levy is causing a financial crisis and normal channels are not working, Form 911 requests help from the Taxpayer Advocate Service.

Can you get the money back?

Sometimes. Section 6343(d) allows the IRS to return levied property if the levy was premature or not in accordance with IRS procedures, if you entered an installment agreement that allows it, if return will help collect the debt, or if the National Taxpayer Advocate finds return would be in both your interest and the government's. A hardship release generally stops future levies. It does not automatically refund money already taken, so ask specifically about a return of levy proceeds if you have grounds.

What not to do

• Do not wait for the next payment to see what happens. Because of the processing cutoffs, waiting usually costs you another month.
• Do not assume your benefits are exempt. SSI is exempt. Regular retirement benefits generally are not.
• Do not ignore unfiled returns. Unfiled years can block payment plans and can knock you out of the low income filter.
• Do not hand money to a company that promises to make the levy disappear. The release tools above are available to you directly, and nobody can promise a particular result.
• Do not overstate expenses on a financial statement. Lack of good faith is a stated reason to deny a hardship release.

If more than one levy is hitting you

A Social Security levy often arrives alongside a bank levy, because the IRS sees where the deposit lands. If your account has been frozen too, read the 21-day bank levy hold. If you are still working and your paycheck is being garnished, see what to do when a wage levy starts. If you are not sure where to begin, start with the first 24 hours of an IRS emergency.

Getting help

A Social Security levy is one of the more fixable IRS problems, but only if someone acts before the next cutoff. If the IRS has already started taking your benefits, or a CP91 is on your kitchen table, our office can review your notices and your budget and talk through the release options that fit. Reach us through GetIRSHelp.com or call (813) 229-7100.