Automated Levies via the Federal Payment Levy Program (FPLP)
Since 2002, the IRS has used the Federal Payment Levy Program (FPLP) to automatically levy up to 15% of certain federal payments, including Social Security benefits under Title II (Federal Old-Age and Survivors Insurance Benefits). However, as of 2015, the IRS stopped systemically levying SSDI benefits through the FPLP. This means that while retirement and survivor benefits can still be automatically garnished, SSDI benefits are excluded from this specific automated process.
Manual Levies on SSDI Benefits
Even though SSDI benefits are exempt from the automated levy program, they are not entirely protected. The IRS still has the power to initiate manual levies on SSDI payments. Unlike the fixed 15% levy under FPLP, manual levies can take a larger portion of the benefit depending on the individual’s tax situation.
Exemptions and Protections
Certain Social Security benefits are shielded from IRS levies, including:
- Supplemental Security Income (SSI): These benefits, intended for low-income individuals who are aged, blind, or disabled, cannot be garnished.
- Benefits to Children and Lump-Sum Death Benefits: Payments made to children and lump-sum death benefits are also off-limits for IRS collection efforts.
The IRS Collection Process
Before levying Social Security benefits, the IRS follows a structured process:
- Notice of Intent: The IRS sends a Final Notice of Intent to Levy, giving the taxpayer 30 days to respond.
- Opportunity for Resolution: During this period, individuals can explore payment plans, offers in compromise, or request a “currently not collectible” status.
- Initiation of Levy: If no resolution is reached, the IRS may proceed with garnishment.
How to Prevent or Stop IRS Garnishment
If you’re at risk of IRS garnishment, here are some options to protect your Social Security benefits:
- Set Up an Installment Agreement: Entering a payment plan with the IRS can halt levy actions.
- Negotiate an Offer in Compromise: You may be able to settle your tax debt for less than the full amount owed.
- Request Currently Not Collectible Status: If you’re facing significant financial hardship, the IRS may temporarily suspend collection efforts.
Final Thoughts
While the IRS does have the authority to garnish Social Security benefits for unpaid tax debts, knowing your rights and options can help you avoid or mitigate the impact. Taking proactive steps—such as negotiating a payment plan or seeking professional tax advice—can make a significant difference in protecting your financial security.
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