Tax Liens & Social Security

Tax Liens & Social Security
••• tax time image by Gale Distler from

The elderly and others who receive Social Security benefits are not immune to owing taxes or, when subject to penalties for nonpayment, from suffering the burden of IRS tax liens. Although government benefits are intended to help those in need or to provide senior citizen support, the government can still reduce Social Security benefits to recover payment of past due taxes.

When taxes become delinquent, the IRS can put a lien on your property and also garnish a portion of your Social Security to pay it them back. You might wonder, "How much can the IRS garnish from Social Security benefits?" Read on to learn about the process and limits.

Identification of Tax Liens

When you owe taxes and they're not paid in a timely manner to the Internal Revenue Service, the IRS can then pursue recovery of these taxes by imposing a tax lien on your property, including real estate, bank accounts and about anything else you own, even if you don't have an official title.

The IRS can seize anything of value in your house and even your house itself to exercise its rights as a lienholder. The IRS can also garnish your bank accounts, your wages and yes, even your Social Security benefits.

Significance of SS Income

Benefits from the Social Security Administration (SSA) are considered income by the IRS if you meet certain requirements. This is why they're reported on your income tax filings annually. The power of an IRS tax lien is that it allows the agency to garnish any income, including government benefits to be paid. While private creditors and debt collectors can't garnish Social Security, the federal government can.

History of Recovery for Taxes

The authority of the IRS to go after property and income for overdue taxes is specified in the Taxpayer Relief Act of 1997. Within this legislation, a special authority is included to allow deductions from Social Security disability or retirement benefits (Title 26, U.S. Code Section 6334(c)).

Limits to Recovery

The IRS is limited in how much it's allowed to take from your Social Security benefits. The agency can deduct up to 15 percent ​of benefits per month that you receive; so if your monthly Social Security income is $1,000, the IRS can garnish ​up to $150 per month​ until the tax bill is paid.

Additionally, not all SSA benefits are subject to IRS garnishment. If you collect Social Security on behalf of your minor children, for example, the IRS cannot garnish those benefits because they are not yours; they belong to your children. If the SSA is already reducing your benefits to repay an overpayment, the IRS will have to wait until that's finished.

The ​15 percent​ cap is per person. So, two people who are married and both receiving Social Security benefits could lose a total of ​30 percent​ of their combined benefits to the lien if they both owe the debt.

Features of Benefits Deduction

The IRS will not notify the debtor each month when it takes SSA benefits. Instead, an automatic deduction of benefits paid will occur until the lien and related tax levy are fully paid to the satisfaction of the IRS. This authority is specified in the Internal Revenue Code Section 6331(h).

Instead of receiving a notice, you'll simply receive a reduced benefit payment each month. If you normally receive $1,000, you'll get $850 instead until the debt is paid.

Appealing Tax Debt

The power of the IRS to deduct SSA benefit is not absolute: Taxpayers can appeal the tax debt. Resolutions can include a compromise payment that settles the entirety of the debt, a slower payment schedule to the IRS, or a hardship exemption due to insolvency. However, the appeal goes to the IRS for review, not to an outside agency.

A unique service offered is that of the Taxpayer Advocate Service within the IRS. This service can help resolve lien issues with a more favorable result.