IRS may levy Social Security benefits to satisfy delinquent tax balances. However, there are rules to be applied when making the decision to levy Social Security benefits. Treasury Inspector General for Tax Administration (TIGTA) recently conducted an audit of Revenue Officer (R.O.) Social Security levy procedures. They concluded that significant numbers of such levies created economic hardship on taxpayers despite the legal requirement that such levies must be released.
Per the TIGTA summary: Revenue Officers make levy determinations of Social Security benefits on a case-by-case basis and exercise judgment in making the determination to levy. While there are special procedures and thresholds for levying individual retirement accounts and 401(k) retirement accounts, there are no special considerations or procedures for Revenue Officers when levying Social Security benefits.
The TIGTA audit found that R.O.s generally follow the general IRS rules in applying Social Security levies. However, for 15 percent of the cases sampled Revenue Officers levied Social Security benefits that likely caused or exacerbated taxpayer(s) economic hardship. It appears the R.O. may be giving equal consideration to non-legal considerations (such as whether taxpayers return revenue officers’ telephone calls) with the legal requirement to release the levy when the levy is creating an economic hardship.
In 28 percent of the sampled cases, R.O.s used the wrong form to levy Social Security benefits resulting in failure to consider allowable exemption amounts before applying the levy. Of these cases, 6 percent involved taxpayers who suffered greater Social Security levies than allowed by law.
Page 22 of the report includes a chart showing TIGTA’s analytical approach. The chart illustrates 2 different taxpayer scenarios where each taxpayer is financially upside down by more than $1,000 per month. Yet, the R.O. levied over $800 for one taxpayer and over $1,000 for the other.
TIGTA made several recommendations that will serve taxpayers well and the IRS has agreed to implement most of them. Therefore, as a taxpayer representative it is imperative to carefully review all levies on taxpayer income, especially Social Security. If you want to read the entire report, it is posted on TIGTA’s website at https://www.treasury.gov/tigta/auditreports/2016reports/201630043fr.pdf.
by: Lawrence Lawler, CPA, EA, CTRS