From: National Organization of Social Security
Tax Liens and Social Security. To collect delinquent taxes, the IRS is authorized by the Taxpayer Relief Act of 1997 to impose an administrative offset against disability or retirement benefits. 26 USC 6334(c). The offset provision applies to delinquent income taxes, corporate withholding and FICA withholding falling within the 10-year look back range of the law.
The collection is 15% per month, with no income exemptions or set asides. There are no collections from children's benefits, from benefits already being reduced to collect a Social Security overpayment, or from SSI benefits. />
For concurrent (Social Security and SSI) beneficiaries, 15% of the Social Security benefit will be taken, with no corresponding increase in SSI for the month. Couples jointly liable for a tax debt will lose 30% of their Social Security income during the collection period.
Note that beneficiaries do have the right to appeal the accuracy of the debt, to offer a compromise lump sum, to request repayment at a slower rate, and to seek a hardship exemption. These rights are administered by the IRS, not Social Security. Debt collection activity should stop while the beneficiary seeks this relief.
The elderly and disabled incur income tax liability from a surprising array of sources, including self-employment efforts, the taxable portion of Social Security benefits as detailed above, emergency withdrawals from IRAs, gains from the early and unplanned sale of investments, and damage awards that include lost wages. The vast majority of this population incurred the tax liability unexpectedly, and without adequate resources to cover the debt. These beneficiaries now face the loss of critical Social Security income through a tax lien, and affected individuals should be encouraged to contact the Taxpayer Advocate Service, a remarkably helpful and independent entity within the IRS: 1-877-777-4778 (toll free), or www.irs.gov/advocate.