IRS levies on Social Security benefits – enforced collection on those who can least afford it
I have seen an increase in calls to my office from retirees who have received an IRS levy on their Social Security benefits. In most every case, the levy (1) relates to conduct from self-employment when they were younger, and that conduct has long ago ended and (2) creates a substantial hardship for the retiree, who needs the levied money for to pay for prescriptions, food, utilities and rent.
The IRS is authorized to levy on Social Security benefits under section 6331(h) of the Internal Revenue Code. These levies are continuous and take 15% of Social Security benefit, a real hardship to those on a fixed budget.
The IRS makes the levy by matching its records against those of the government’s Financial Management Service. Once a match is made, the IRS will send a Final Notice Before Levy on Social Security Benefits (CP 91). If no action is taken within 30 days as to the notice (i.e, collection appeal), the IRS electronically transmits the levy to FMS for a reduction in the benefit.
The IRS had previously used a income filter to systemically exclude those with income below a specified threshold. The Government Accountability Office (GAO) found the filter flawed, and in 2006 the IRS eliminated it.
The IRS Taxpayer Advocate reports what I have seen: Their case intake from the Federal Levy Program, which includes Social Security benefits, increased from 525 cases in fiscal year 2004 to nearly 3,500 cases in fiscal year 2007.