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Our teams of IRS problem solvers have seen an increase in calls to our offices from retirees who have received either a "Notice of Intent to Levy" or have been hit with the order to seize their Social Security. The IRS can and will levy Social Security benefits. In nearly every case, the IRS levy relates to conduct from self-employment when they were younger, and that conduct has long ago ended. An IRS levy at this stage of life creates a substantial financial hardship for the retiree, who needs their Social Security to pay for Medicare, Medicare Advantage, prescriptions, food, utilities, auto expenses, and rent.
The IRS is authorized to levy on Social Security benefits under section 6331(h) of the Internal Revenue Code. This is called the Federal Payment Levy Program (FPLP). This type of tax levy is both devastating and continuous. This tax levy will take, at minimum, an automatic 15% of your Social Security benefit. The average Social Security benefit is approximately $1200 to $1400 per month. An IRS levy is a devastating hardship to those on a fixed budget.
The Internal Revenue Service makes this all possible by matching its records against those of the government’s Financial Management Service (FMS). The FMS is the government computer program that sends out checks. Once a match is made, the IRS will send a Final Notice Before Levy on Social Security Benefits (CP 91). If you do nothing within 30 days (i.e, collection appeal or hire a tax professional)), the IRS electronically transmits the tax levy to FMS for a reduction in the benefit.
It is imperative that someone receiving Social Security (Veterans Pensions as well) immediately act to save their benefits and pensions. The reason for this is: once the tax levy is ordered, the IRS computer must tell the FMS computer to release the levy. Depending on the date of your benefit payment, the tax levy could take 1 or 2 seizures before it can be removed.
The IRS had previously used an income filter to systemically exclude those with income below a specified threshold. The Government Accountability Office (GAO) found the filter flawed, and in 2006 the IRS eliminated it.
The IRS Taxpayer Advocate reports what we have been observing: Their case intake from the Federal Payment Levy Program (FPLP), which includes Social Security benefits, increased from 525 cases to nearly 3,500 cases. These numbers are just the tax levies handled by the Taxpayer Advocate's office. As computer systems get upgraded, the IRS will dramatically increase its levy seizures of SoSec benefits as this is a quick and easy collection that will close a file.
You really should consult with an experienced tax professional when resolving an IRS levy (especially a levy on Social Security benefits). Here's why:
The IRS computer is not a thinking "human being" that you can speak. The IRS sends out the order to levy to the Social Security Administration (SSA) through their Automated Collection System (ACS). It is simply a computer match putting together a taxpayer with tax debt and a Social Security recipient. It's that easy.
An IRS levy on your Social Security benefits puts you in a "cage match" with government computers. When the IRS sends a levy order to the Social Security Administration, you may end up having one "short check" even if you have an IRS professional obtain a levy release. The order to release the levy must be sent by the IRS and received by the Social Security Administration. The number of levies that are enforced will depend on your payment dates.
Requesting an IRS levy release elevates your file to an IRS agent at their Automated Collection Service (ACS). This is when the intrusive questions start, and the level of scrutiny increases. It would be best for an experienced tax professional to handle all contact with the IRS for you. Most people in their haste to have the levy stopped will inevitably say things that will hurt them.
The IRS is sensitive to how they treat retirees on a fixed income. Who wants to listen to a desperate elderly person beg for their money. When they levy a retiree’s Social Security, the Agency lets the ACS do the dirty work.
With money coming in from your Social Security, the IRS computer usually stops searching for other sources of collection and considers the file closed. In our experience, the IRS can stand put on a Social Security levy for years without taking any further enforcement action.
Most Social Security (or Veterans) recipients can be placed into Currently Not Collectible status (IRS Hardship) or settle with Internal Revenue Service with a well-crafted Offer in Compromise. These actions will stop an IRS levy.