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Can You Afford a 15% Cut in Your Social Security to Satisfy a Tax

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If you owe money to the IRS, and you are receiving Social Security benefits due to: Federal Old-Age and Survivors Trust Fund (or) Disability Insurance Benefits. The IRS can take 15% of your Social Security payments to satisfy your tax debt. Prior to 1996, there was a $750/month “off limits” amount that had to be left for the Social Security recipient. However, that changed with the introduction of the Federal Payment Levy Program, which allowed for 15% of the total monthly payment to be collected – regardless of the amount. However, benefit payments such as lump-sum death benefits, benefits paid to children are not eligible. Additionally, Supplemental Security Income (SSI) payments, under Title XVI, and payments with partial withholding to repay a debt owed to Social Security will not be levied through the Federal Payment Levy Program. The IRS must send you a “Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing” form. At this point, you’ll have 30 days to respond. You have a few choices at this point – you can either: – Pay the tax – Negotiate an alternative payment method (payment plan, partial payment plan, Offer-in-Compromise) – Be declared non-collectible (hardship) status – File for an appeal – Ignore the Warning and do nothing If you decide to do nothing and you don’t contact the IRS, after 30 days they will submit your levy to the Financial Manage-ment Service (FMS) and 15% of your Social Security will begin to be taken to satisfy your tax debt. The levy will remain in effect until the tax is paid off, or until you make other arrangements. If you’re counting on Social Security benefits to live, you can’t afford for the IRS just to waltz in and take 15% of your livelihood without a fight. Depending on your situation, you may be able to qualify for an Offer-In-Compromise and end up paying the IRS significantly less than you owe. However, be forewarned – the IRS only accepted 16% of Of-fers-in-Compromise in the year 2006. To increase your chances of having your offer accepted, it would be a very good idea to have your paperwork prepared.

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