If you owe money to a federal agency, such as the IRS or the Department of Education, the federal government will go to great lengths to collect it from you. It has programs in place to ensure that the money you owe is paid in full, particularly if you are collecting federal benefits. While your Social Security check is exempt from most collection efforts, almost nothing is exempt from a federal debt.
Federal Debt
If you owe back taxes to the IRS, you are subject to all the collection efforts allowable by law. The IRS can order seizure of your federal income tax refund; send your account to a collection agency; or garnish your wages or federal benefits, which includes your social Security check. If you are eligible for retirement and have not yet begun to collect your benefits, you will not be prohibited from collecting, but your check may be reduced to pay your debt. It can also place a tax lien on all of your property including houses, cars and boats.
Federal Payment Levy Program
A debt to the IRS will not prevent you from collecting your Social Security benefits, however, it also will not prevent the IRS from placing a levy on the benefits that you collect. If the IRS places a levy on your social Security benefits, it can garnish up to 15 percent of your check. The IRS does not have to go to court to accomplish this, it is done under the Federal Payment Levy Program. The levy remains until all the back taxes are paid, you make other arrangements to satisfy the debt or the 10-year statute of limitations on collection is reached.
Required Levy Release
If your Social Security benefits have been subject to an IRS levy, the IRS is required to release the levy under certain circumstances. The IRS must release the levy if you paid your debt in full; the time period for collection expired prior to the date the levy was served; proper notification procedures were not followed; an automatic bankruptcy stay is in effect; you have appealed the decision; or you are arranging an alternative payment arrangement or offer-in-compromise.
Optional Levy Release
The IRS can choose to release the levy under certain conditions. These are releases that are not required by law, but are at the discretion of the IRS. The levy may be released if the IRS determines that the levy would cause you an economic hardship; you enter into an escrow arrangement; you enter into an installment agreement or some other acceptable means of paying the tax; or you agree to extend the 10-year period the IRS has to collect the debt.
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