Can the IRS Take Your Social Security Disability Check?

Understanding the financial protections surrounding Social Security Disability Insurance (SSDI) is crucial for those who rely on these benefits. For many recipients, SSDI checks provide essential support when other income sources are unavailable due to disability.

Legal Basis for Withholding

The IRS’s authority to withhold Social Security Disability Insurance (SSDI) benefits is established under the Federal Payment Levy Program (FPLP), authorized by the Internal Revenue Code Section 6331(h). This program allows the IRS to levy up to 15% of a taxpayer’s monthly Social Security benefits to address outstanding tax debts. Safeguards introduced by the Taxpayer Relief Act of 1997 ensure that a portion of these benefits remains protected, preventing individuals from being left without basic income. The IRS cannot levy benefits below an exempt threshold, which is adjusted annually for inflation.

Before initiating a levy, the IRS must issue a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing at least 30 days in advance. These notices inform taxpayers of their rights and options to contest the levy or arrange alternative payment solutions. The IRS is also required to evaluate whether the levy would cause financial hardship, which could result in a suspension or reduction of the levy.

Notification and Timelines

The IRS follows a structured process before levying SSDI benefits. Taxpayers first receive a CP14 notice about their unpaid tax liabilities. This is followed by a CP504 notice, which warns of potential levies. The process culminates with the Final Notice of Intent to Levy, accompanied by the Notice of Your Right to a Hearing. Taxpayers then have 30 days to request a Collection Due Process (CDP) hearing, which provides an opportunity to contest the levy or negotiate alternative arrangements, such as installment agreements or an Offer in Compromise. The IRS must consider these proposals, especially if the taxpayer demonstrates financial hardship.

Calculating the Withheld Amount

The IRS can levy up to 15% of SSDI benefits exceeding an exempt income threshold, which is adjusted annually for inflation. For example, if the exemption threshold is $1,200 per month and a taxpayer’s SSDI benefit is $1,500, the IRS can levy 15% of the $300 surplus, resulting in a $45 monthly levy. Taxpayers can consult Form 668-W(c)(DO) for detailed information about the levy process and exemptions.

Potential Exemptions

Taxpayers can request exemptions from IRS levies on SSDI benefits by demonstrating financial hardship. This requires evidence of essential expenses, such as monthly budgets or medical costs. While Section 207 of the Social Security Act offers some protection against creditors, its scope is limited for federal tax debts. The Taxpayer Advocate Service can assist individuals facing significant financial difficulties by expediting exemption requests or identifying other relief options.

Payment Arrangements

Establishing a payment arrangement can help reduce the impact of IRS levies on SSDI benefits. Installment agreements allow taxpayers to pay their tax debt in manageable amounts over time. The IRS offers streamlined options for debts below $50,000, and taxpayers can apply online or submit Form 9465. For those who cannot meet installment terms, an Offer in Compromise (OIC) may allow for settlement of the debt for less than the full amount owed. OIC applications require detailed financial disclosures via Form 433-A (OIC) and payment of an application fee, which may be waived for low-income taxpayers.