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Can the government garnish Social Security disability for back taxes?

Social Security Disability Benefits and Creditors

In 2012, over 50 million Americans receive some form of Social Security Benefits.  A similar number of Americans—if not a larger number—also have some form of credit issues.  If you are someone who falls into both categories, you may be wondering what impact bad credit (and the collection efforts of creditors) can have on your Social Security Benefits.

Section 207 of the Social Security Act

If you are receiving Social Security Benefits, whether from Social Security Disability Insurance (SSDI)Supplemental Security Income (SSI), or other Social Security retirement benefits, Section 207 of the Social Security Act generally prevents creditors from receiving a court-ordered garnishment or levy of those benefits.  Section 207 applies to both unsecured creditors, such as credit card companies, as well as secured creditors, such as banks or other lending agencies behind a mortgage or home equity line of credit.  This law also applies to collection agencies for either type of creditor.

However, there are specific instances where Section 207 of the Social Security Act does not fully protect your Social Security Disability and Social Security Disability Insurance (SSDI) (Supplemental Security Income is excluded from these exceptions and is not garnished).  These instances are as follows:

Payments related to federal income taxes

The Social Security Act allows the Internal Revenue Service (IRS) to garnish up to 15 percent of your monthly Social Security payments for repaying unpaid federal income tax debt.

Payments related to child support or alimony

Section 207 of the Social Security Act allows a court to withhold as much as 60 percent of your Social Security benefit payments for the repayment of past due child support or alimony payments.  The amount of your Social Security benefits that may be withheld is capped at 50 percent if you have another child or spouse to support.

In either case, if you are 13 or more weeks late on your child support or alimony payments, an additional 5 percent of your monthly Social Security benefit may be withheld beyond the above numbers unless you are able to demonstrate to the court that it would create an undue financial hardship.

Payments related to other money owed to the federal government

The final category of debt that can result in the withholding of Social Security benefits is any other debt owed to the federal government.  Examples of this type of debt include student loans or mortgage loans guaranteed by the federal government.

The federal government can withhold up to 15 percent of your Social Security benefit payments for the repayment of these debts so long as it does not reduce the amount of Social Security benefit payment you receive below $750 per month.

Several factors affect the actual amount of money withheld from your Social Security benefits.  The primary  factory is if the withholding of your Social Security benefits would create an undue financial hardship.  Cases where an undue hardship would be present if benefits were garnished can result in a reduction or possibly completion elimination of the withholding.  However, in all cases the burden to prove financial hardship is on the recipient of the Social Security benefit payments.

Can Supplemental Security Income (SSI) be garnished?

The protections for Supplemental Security Income are stricter than those for Social Security retirement or SSDI. SSDI payments and Social Security retirement payments can be garnished to pay back taxes, child support, federal debt, or student loans, Supplemental Security Income (SSI) cannot be garnished even for these debts.

Exceptions exist for Supplemental Security Income because it is considered a welfare benefit which has not been generated from a claimant’s earnings record.

Hiring a Tax Attorney

The information above is general in nature and you should not consider it legal advice.  If you need guidance related to your Social Security benefits and how creditors may affect receipt of your benefit payments, you should speak with a disability attorney who can evaluate your individual situation and advise you on what rights you have to protect your Social Security benefit payments under the law.
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