He Owes the IRS Back Taxes. It Can Take 15% of His Social Security, and Most Retirees Don’t Know It

Quick Read

• The IRS tin levy up to 15% of Social Security retirement, survivor, and disablement benefits to cod unpaid national income taxes.

• A $2,000 monthly payment shrinks by $300 nether the levy, and yearly cost-of-living adjustments bash not flight it.

• Retirees tin halt the levy by entering an installment agreement, connection successful compromise, oregon Currently Not Collectible presumption with the IRS.

• A caller survey identified 1 azygous wont that doubled Americans' status savings and moved status from dream, to reality. Read much here.

A 70-year-old retiree opens a missive from the IRS and learns his monthly Social Security cheque is astir to shrink. He owes backmost national income taxes from years helium filed precocious and ne'er paid successful full. What stuns him is the enactment explaining that the authorities tin instrumentality a portion of his Social Security to fulfill the bill. I thought Social Security was untouchable, helium tells his daughter. He is close astir about debts. Federal taxation indebtedness is the exception.

This concern is much communal than retirees think. Social Security is the azygous largest transportation programme successful the country, with $1.6 trillion flowing to households for each of 2025. When a retiree carries aged taxation indebtedness into retirement, that monthly cheque becomes the astir reliable happening the IRS tin reach.

The regularisation astir everyone gets fractional close

Section 207 of the Social Security Act shields benefits from astir each creditor a retiree mightiness encounter. Credit paper companies cannot garnish a retiree's check. Medical collectors cannot interaction it. Personal indebtedness servicers, car repo lawyers, and backstage indebtedness buyers each deed the aforesaid wall. If someone's benefits onshore successful a slope relationship by nonstop deposit, fiscal institutions are required to support a baseline of caller deposits from astir garnishment orders.

The objection is the national authorities itself. Through the Federal Payment Levy Program, the IRS tin levy up to 15% of a monthly Social Security payment to cod unpaid national income taxes. Supplemental Security Income, the needs-based program, is disconnected limits. Regular retirement, survivor, and disablement benefits tin each beryllium levied.

Read: Data Shows One Habit Doubles American's Savings And Boosts Retirement

Most Americans drastically underestimate however overmuch they request to discontinue and overestimate however prepared they are. But information shows that people with 1 habit person much than treble the savings of those who don't.

For our 70-year-old, a $2,000 monthly payment becomes astir $1,700 aft the levy kicks in. That $300 difference, each month, for arsenic agelong arsenic the indebtedness sits unresolved, is the portion astir retirees ne'er spot coming. The 2.8% 2026 cost-of-living accommodation (COLA) does not undo it. The levy applies to the new, higher payment too.