The 15% Tax Levy That Can Come Out of Social Security
Understanding the 15% Social Security Levy
Social Security checks play a crucial role in many retirees’ financial planning. However, it’s important to be aware of potential deductions that can impact the amount you receive. One such deduction is the 15% Social Security levy, which can be imposed if you have overdue federal taxes.
If you owe federal taxes, the IRS has the authority to garnish up to 15% of your Social Security benefits. This means that a portion of your monthly benefit could be withheld to satisfy your tax debt. While paying off your taxes is the most straightforward solution, there are steps you can take before the levy takes effect.
Which Social Security Payments Are Affected?
It’s important to note that not all types of Social Security payments are subject to levies. Supplemental Security Income (SSI) cannot be garnished, while retirement and Social Security Disability Insurance (SSDI) benefits are eligible for levy. Only government agencies like the Treasury and IRS have the authority to impose levies on your Social Security payments.
Responding to a Levy Notice
Levy notices typically don’t come out of the blue. There are usually warning signs in the form of correspondence from the IRS before your benefits are reduced. If you receive a levy notice, it’s essential to act promptly. Contact the IRS to verify the debt and explore your options for resolving it.
You may have the choice of setting up a payment plan, making an offer in compromise, or applying for hardship status. A payment plan allows you to pay off the debt in installments, while an offer in compromise involves settling for a reduced amount. Hardship status is granted to individuals who demonstrate financial hardship and cannot afford to have their benefits garnished.
Protecting Yourself from Scams
It’s crucial to be vigilant against potential scams related to Social Security levies. The IRS will never demand payment via unconventional methods like cryptocurrency or gift cards. If you receive suspicious calls or messages regarding a levy, verify the authenticity of the request with the IRS directly.
