﻿Social Security benefits are one of the most protected forms of income from creditors. Your
credit card company cannot garnish your Social Security benefits. Your mortgage company cannot
garnish your Social Security benefits. If you have outstanding medical debt,
your Social Security benefits cannot be garnished for that. If you are sued for something — even
something really bad like wrongful death, for example — and you lose, and whoever sued you gets
a judgment against you, they still cannot touch your Social Security benefits. They have a special
protected status. And not only are these payments themselves protected from garnishment before they
hit your bank account, but they are also protected from levy after they hit your bank account,
assuming you get your benefits direct deposited rather than on a Direct Express card or something
like that. If a creditor tries to garnish money in your bank account, your bank has to look at
your past two months' of account history to see if you received any Social Security benefits direct
deposited to the account, and if you have, the bank is obligated to protect two months' worth
of that money and let you use it. Note that if you receive paper checks, most of the time
the bank won't protect you there, and your entire balance could be levied, and you'd have to go to
court to prove that some of your Social Security was garnished. So it usually makes sense to get
a direct deposit rather than a paper check for a variety of reasons because it's almost guaranteed
in that case the bank will protect at least two months' worth of your Social Security benefits,
though sometimes they mess that up and you have to go fix it. However, there are two exceptions to
the wall of protection that is generally afforded Social Security benefits; there are two kinds
of creditors that can take your Social Security payments before they hit your bank account. The
first kind of creditor who can take your Social Security payments is an individual with a judgment
against you for child support or alimony. And the other kind of creditor is the federal government.
These exceptions apply to Social Security retirement income and SSDI (Social Security
Disability Income), but they do not apply to SSI (Supplemental Security Income) — SSI income cannot
be levied or garnished, even for child support, alimony, or by the federal government. But
regular, old Social Security — the money you can start collecting from the government as early as
age 62 if you have at least 40 credits (basically 10 years of work in most cases) — can be garnished
for child support, alimony, or federal government debts. So can the IRS garnish Social Security?
Yes, the IRS can garnish Social Security — state governments cannot, by the way — but the IRS can
garnish your Social Security, but there are some things you can do about it. And I'm going to tell
you what they are at the end of this video. But why should you listen to me? My name is Logan
Allec, I am a CPA, I am one of the most sought after CPAs in the nation when it comes to tax
resolution and relief and talking to the media and things like that, my company is Choice Tax Relief,
we have saved taxpayers millions of dollars of back taxes and got them out of very difficult
situations with the IRS, if you’d like to speak with somebody about your situation, give us a
call at 866-8000-TAX, that’s 866-8000-829, you can also visit our website choicetaxrelief.com,
fill out the form there, and we will reach out to you. And before I get into what to do if you’re
facing a Social Security garnishment, also known as a Social Security levy, I want to tell you how
they work, step by step, as well as how much the IRS can garnish your Social Security for and it's
actually potentially a greater amount than your Social Security can be garnished for other federal
government debts. So any IRS levy — which is just another word for seizure — any IRS levy, including
a Social Security levy, starts with an unpaid tax debt. So let's say you file a tax return — or the
IRS files an SFR for you because you have unfiled tax returns — that indicates a certain balance
due. And, by the way, if you’ve gotten behind on filing your taxes, watch my video on what to do if
you haven’t filed taxes in years, in that video I give you a seven-step gameplan on how to approach
that situation, a link to that video is at the top of the screen and in the description below. OK,
so the IRS has a balance on you, so what’s going to happen? Well, between one and two
months after you file your tax return showing a balance due assuming that’s the scenario we’re
talking about — typically five or six weeks — the IRS will probably send you a CP14 Notice. This is
the "Balance Due and Demand For Tax Notice." This is one of the most common notices the IRS
sends, and it basically informs you of the amount of your unpaid taxes, penalties, and interest
the IRS believes you owe and it requests that you pay this amount within 21 days of the date of the
notice. And that deadline is 10 days if the amount the IRS believes you owe is $100,000 or more. Then
if you have not paid the tax on the CP14 and have not otherwise responded to the CP14, then
five or six weeks later, the IRS will typically send you a CP501, which looks kind of like the
CP14 and essentially says the same thing. Then five or six weeks later, you'll get a slightly
more seriously-worded notice, the CP503, and then five or six weeks later, the CP504. And this CP504
mentions something that the other notices may have not mentioned. And that is that the IRS intends to
levy, that is, seize, first your state tax refund and then if that state tax refund doesn't satisfy
your federal tax debt, other property as well. And then if you don't do anything after receiving the
CP504, you'll wait another five or six weeks, and you should be getting the LT11 in the mail — used
to be Letter 1058s, but now we see LT11s far more often. This is your final warning that
the IRS is about to take your stuff if you don't pay up or request a CDP hearing within 30 days
or otherwise deal with this problem, and on the left-hand side of the first page of the LT11,
you will see a tidy list of the potential things the IRS could take. And what is that last one?
"Social Security benefits." That’s right, it’s right there on your levy notice. So how much of
your Social Security benefits can the IRS garnish? The IRS can automatically garnish up to 15% of
your Social Security benefit amount automatically through the Federal Payment Levy Program (FPLP).
So if you receive $1,000 in Social Security benefits per month, the IRS can garnish up
to $150 of those benefits per month. Now, this automatic levy only applies to Social Security
benefits — not SSDI and not SSI. SSI cannot be levied at all as discussed previously. SSDI,
on the other hand, can be levied but only under a manual levy — not through the IRS's automatic levy
program. And even some straight-up Social Security payments can be exempt from levy, such as benefits
paid to children for example. But the general rule for the majority of people collecting Social
Security is that you can see the IRS automatically garnish up to 15% of your monthly benefit. Now,
you may have heard of this protection of the first $750 of Social Security benefits from
garnishment. That is not the case with federal tax debt. With federal tax debt, there is no
protection of your first $750 of Social Security income per month; for other government debts,
the first $750 of your monthly Social Security payment is protected from levy, but this is
not the case with federal income tax debt. 15% of your monthly benefit amount can be levied even if
the levy causes the amount left over to you to be less than $750. Now, before the IRS starts taking
your Social Security, it will send you Notice CP91. So after the 30 days mentioned in the
LT11 that I talked about previously previously — assuming you don't deal with the issue or
file for a CDP hearing during those 30 days — your stuff becomes fair game for the IRS to take.
And keep in mind that the IRS may or may not go after all leviable income and assets at once.
Oftentimes retirement-related assets and income are further down the list of things they’ll levy,
but they have a right to it. But you can be sure that they will send you a CP91 Notice in the mail
before they start garnishing up to 15% of your Social Security benefits. If you owe business
tax debt to the federal government, and the IRS has the right to collect it from you personally,
it will send you a similar notice, the CP298 Notice, rather than the CP91 Notice, but I
imagine most of you are dealing with individual tax debt, and that’s why the IRS is garnishing
your Social Security. Now, action items, what should you do if the IRS is garnishing your Social
Security? If the IRS is garnishing your Social Security income — or you believe they are going
to garnish your Social Security income imminently — you need to act quickly. If it's come to this
point, chances are the IRS's position is that it's given you enough time to deal with this problem,
but since you haven't, they're going to take what they believe is theirs. So what you should do
if the IRS is garnishing your Social Security? Well, you need to get relief, plain and simple,
you need to argue your case with the IRS and work out a deal. The easiest deal to make with them is
a full-payment installment agreement — this if where you say, “OK, IRS, I’m going to pay you
what I owe,” just give me some time such as six years. If you don’t owe that much,
they will generally go for that without a fight. So maybe getting into something like that would be
an option to stop the bleeding if you need the bleeding to stop immediately. But beyond that,
if you’re looking at actually dealing with your tax debt so you don’t have to pay the IRS anymore,
you have to analyze your options. A lot of folks who are in this situation where the
IRS is garnishing their Social Security actually might qualify for an offer in compromise. This is
an agreement with the IRS to settle your debt for less than you owe. You have to qualify
for it. I have created other videos on this channel about the offer in compromise program,
there is a link to one of those at the top of the screen and in the description below. Now, from
experience I know that some folks in their 60s or 70s who are having their Social Security garnished
they may not necessarily have a lot of cash flow, but many of them do own a home. Something
like almost 80% or something like that of 65-to-74-year-old Americans own a home. And
although they don’t feel rich because they may not have a lot of cash flow, they are house rich. And
the IRS counts your equity in your home against you for offer in compromise purposes. They do give
you a 20% haircut on the fair market value of your home, you want to make sure you point out
any needed repairs or undesirable features about your home, but at the end of the day, that can
only take you so far especially if your home is paid off, free and clear. So what’s actually
sometimes a better strategy for individuals, older individuals who are collecting Social Security,
and they’re seeing the IRS taking some of that, is to get them in a special hardship status
called currently not collectible status or CNC status. And the reasons for this are manifold,
but one big reason is that if we can show the IRS that you cannot access the equity in your
home — which if you’re cash flow poor, which from experience I know many people in this
position are, which if you’re cash flow poor, it’s pretty easy to get a lender to reject you
for a cash-out refi on your house if you’re cash flow poor or if you have poor credit — so if we
can give a couple loan denial letters to the IRS, and there’s a little more to it than this,
but this is it in a nutshell, we show the IRS a couple loan denial letters, we show the IRS your
cash flow statement showing you are in the red or very close to that every month, and of course the
IRS has standards and ways of doing that math, but if we successfully make these arguments,
we can get you in the special hardship CNC status. And probably the best part about CNC
status is that while you are in this special status, the IRS’s 10-year clock that it has
to collect your debt that begins on the date your tax is assessed keeps ticking.
See, the IRS has 10 years from the date it assesses a tax to collect that tax. However,
there are things and events that can toll the statute of limitations,
meaning pause it for a time, and typically, if the IRS can't take collection activities against
somebody, the collections statute is tolled during that time period. However, this is not
the case with CNC status. So one strategy we like to look at for our clients -- especially if we're
closing in in the next few years on the ten-year statute of limitations on collections -- is
getting the taxpayer in CNC status and just letting that statute of limitations run out.
And what's the end result here? The statute of limitations on collections has run out,
so the government no longer has a right to pursue collection of that tax liability – forever!
And here's the kicker: The taxpayer did not have to pay the IRS a cent. That’s right,
if you are able to remain in CNC status throughout that entire 10-year period — and keep in mind
that that 10-year period can be extended for other things like bankruptcy or submitting an offer in
compromise or an installment agreement request — then your tax debt will simply drop off without
you paying the government a dime. There are some downsides here, CNC does not lien proof you,
if the government is letting you not pay your tax debt right now while you’re in CNC status,
it stands to reason that it would want to protect its interests if you were to, say,
sell a property and have hundreds of thousands of dollars wired to your bank account from escrow.
But if you can’t get cash out of your house anyway and you’re not looking to sell your
home before your tax debt drops off in the next 10 years or less, what do you care? Tax liens do
not appear on credit reports anymore, by the way. OK, so CNC status is an option,
especially for folks on a fixed income because yes, the IRS can kick you out of CNC status,
but they typically only do that in a windfall situation or a situation where you’re making a
lot more money now than you were when you were placed in CNC status, but that’s typically not
the fact pattern we see for folks who are essentially retired and collecting Social
Security. I did a whole video on currently not collectible status, you can see a link to that
video up here in the upper-right-hand corner of your screen as well as in the description
below. So offer in compromise and CNC status are the big kahunas, the big relief programs we like
to get our clients whose Social Security is being garnished into, there are others,
if we can’t show CNC, which is basically no cash flow, sometimes we can secure a PPIA,
that’s a partial-payment installment agreement, I think I went over that option recently in more
detail in my eight ways to get tax debt relief video, which you can click over to at the upper
left hand corner of your screen, I also have all my tax relief videos in a playlist for you
to watch at the bottom left of your screen, I have a free report for you, “Tax Debt Secrets the IRS
Doesn’t Want You to Know” right below my face, and of course if you’d like to speak with someone
about your tax situation, you can give us a call here at Choice Tax Relief at 866-8000-TAX
or visit us at choicetaxrelief.com, I’ll see you in the next video, folks, buh-bye.