Social Security garnishment is generally prohibited when it comes to creditors. But the U.S. Government is no ordinary creditor and has the full force of the IRS to perform levies against tax-delinquent debtors. So can the IRS garnish Social Security? Simply put, yes. The IRS is among the only agencies that can levy your Social Security money if you owe back taxes.

How Much Can the IRS Garnish?

Title II of the Social Security Act and Section 6331 of the IRS Code allows the IRS to perform manual levies on Social Security income or use the Federal Automated Payment Levy Program.

The IRS Code enables the IRS to levy Social Security disability (SSD) payments, retirement payments, and survivor payments. It does not, however, allow the IRS to garnish lump-sum death payments, children’s benefits, or Supplemental Security Income (SSI) payments.

Under the Federal Payment Levy Program, the IRS can garnish up to 15% of your Social Security payment. If you are being garnished manually, the Social Security Administration will set a minimum monthly allotment for you to take home and then take everything else. The minimum monthly payment changes each year. You may, however, qualify for other exemptions.

What Is the Social Security Garnishment Process?

Before the IRS begins garnishing your social security payments, they issue several letters informing you of the debt you owe to the U.S. government. If you owe money, the IRS will send a CP-14 form which states how much you owe and when it’s due. The IRS generally issues three more notices that escalate the situation. Finally, you will receive a CP-91 or CP-298 which informs you of the IRS’s intent to levy your Social Security benefits. They will give you 30 days from the issuance of the final notice to rectify the outstanding debt.

The SSA has no authority over this situation. It’s the IRS that you’ll need to deal with.

How Can You Release a Levy on Your Social Security Benefits?

How can you remedy the situation if your Social Security benefits are subject to levy by the IRS? You have a few options:

• Full repayment. Obviously, if you can pay the outstanding balance in full, you can have the levy lifted on your Social Security payments
• Pay in installments. Prior to or after the IRS has begun levying your Social Security payments, you can agree to repay the deficient balance in installments. Currently, you must owe less than $50,000 and be able to repay over the course of six years.
• Partial payment installment agreement (PPIA). PPIA allows those without the financial means to repay all of the debt to pay some of the debt monthly over a specific time period. The agreement allows some of the debt to expire. If you’re at the point where the IRS is threatening to garnish your Social Security payments and cannot afford to repay the entire debt in installments, a PPIA can save you a considerable amount of money. You will be required to disclose your financials to the IRS.
• Offer in compromise. An offer in compromise is similar to a PPIA, but instead of making monthly installments over the course of a few years, you make one lump-sum payment. Financial disclosure is required.
• Currently not collectible. If you are in dire financial straits and cannot afford to make payments to the IRS, the IRS will label your case as CNC (currently not collectible).
• Bankruptcy. Some tax debt is dischargeable in bankruptcy, but it must meet specific criteria. You should talk to a bankruptcy attorney before attempting to discharge tax debt this way.
• Innocent spouse relief. Sometimes spouses find themselves on the hook for tax debts incurred by their husband or wife. If that’s the case, you can apply for innocent spouse relief, but the requirements are strict.

How a Fairfax VA IRS Attorney Can Help

Can the IRS garnish Social Security? Yes, but there are ways to appeal a tax levy or otherwise reach an agreement with the IRS. Contact Sodowsky Law Firm, PC to learn more.

If you owe the IRS money, they may pursue aggressive collections actions against you. Unlike private lenders, they don’t have to go through the court to place liens on your property, levy your bank account, or garnish your wages. They do, however, have to provide you with notice of their intent to do so. If you disagree on the amount the IRS claims you owe, you can request a Collection Due Process hearing by filing IRS Form 12153. But you will have to act quickly.

What Is a Notice of Federal Tax Lien or Notice of Levy?

These notices are either hand-delivered to your door or sent via certified mail to your home. They include:

• Final Notice of Intent to Levy and Notice of Your Right to a Hearing (Letter 1058 and Letter 11)
• CP90 Notice: Final Notice of Intent to Levy
• CP92 and CP242: Notice of Levy Against Your Tax Refund
• Letter 3172: Notice of Intent to File a Tax Lien

What Is a Collections Due Process Hearing?

A CDP hearing allows taxpayers to appeal an IRS lien, levy, or garnishment. The hearing doesn’t take place in a courtroom; it can be done in person or over the phone. No transcript is taken and you are not required to take an oath.

Purpose of the CDP Hearing

During the hearing, you can make several claims to question the validity of the notice. For example, you can apply for innocent spouse relief or otherwise contest the amount of money owed. Additionally, you can work out a repayment plan or suggest other alternatives for collection of the debt.

The purpose of the hearing is to reach a compromise so that the IRS can collect taxes and you can address your concerns about the collection activity.

Notice of Determination

Upon the completion of the Collection Due Process hearing, the IRS will issue a notice of determination, which outlines the following:

• Has the IRS delivered the intent to levy notice properly? The notice must be issued in person or sent via certified mail to your last known address.
• Will a tax lien or levy take place?
• Has repayment been arranged? If so, the notice of determination will outline the specifics of a repayment plan.
• Was tax relief offered?
• Did the IRS rule on a request for innocent spouse relief?

If you disagree with any of the IRS’s determinations, you have 30 days to file an appeal in either Tax Court or the U.S. District Court.

Why Should I Request a Collection Due Process Hearing?

After the request for the hearing, the IRS will not take any action against your property and offer you the chance to make payments in some other way.

You can also request tax relief due to hardship or illness. Hardship requests have strict guidelines. You can request a hardship exemption if:

• You are terminally ill and have crushing medical debt;
• You’re on Social Security or unemployment; or
• You simply don’t have the income to repay.

In some cases, you can work out an arrangement with the IRS by taking out a home equity line of credit against your home. The lender may not offer you the loan unless the IRS lien is subordinated to their own. In other words, if you default, the private lender’s lien would take precedence over the IRS’s. You can use the loan to repay the IRS and then make payments on your home equity loan.

Additionally, you ask the IRS to discharge the lien so that you can sell the asset without the title being clouded, then use the money from the sale to repay your outstanding tax debt.

How Do I Request a CDP Hearing?

You will have 30 days from the date of receipt of the IRS notice of intent to levy to request a Collection Due Process hearing.

To do this, you simply fill out IRS Form 12153 with your name, address, phone numbers, Social Security number, and the reason why you are requesting the hearing. The IRS will then schedule the meeting and collections activities against you will stop until the situation is resolved.

Speak to a Fairfax VA Tax Attorney Today

To learn more about how to resolve a problem with the IRS, contact the Sodowsky Law Firm, PC.

If you are facing an IRS criminal investigation, the impact on your professional and financial well-being can be devastating. An experienced tax lawyer will help ensure that your business doesn’t make costly mistakes that could lead to an investigation, as well as offer experienced defense if you are already in trouble with the IRS. Contact Sodowsky Law firm, P.C. to learn more about how we can protect your rights.

How Is an IRS Criminal Investigation Different From an IRS Audit?

When the IRS audits you, they want to know whether there are any errors in how your taxes were calculated. With a criminal investigation, the IRS is building a case against you to be prosecuted by the U.S. Attorney’s Office.

A criminal investigation is also a much more serious matter than an audit, potentially involving considerable consequences. You could face enormous fines and legal costs, as well as jail time. You could also lose your professional license, job, and future livelihood.

IRS criminal investigations are not pursued as frequently as audits, although an investigation could be triggered by an audit. They may also be triggered by an error, misunderstanding, or malpractice by your accountant — for example, unreported income, false statements, or declaring too many deductions could lead the IRS to suspect tax evasion or fraud.

What Is the Investigation Process?

The IRS’s Criminal Investigation Division (CID) conducts its investigations thoroughly and ruthlessly. CID is staffed by federal agents trained as financial investigators carrying guns and badges. It could take years before you are even aware that you are under investigation. In that time, CID will interview family, friends, and others who may know you and your finances. They will use this time to gather evidence of tax evasion or tax fraud.

Once you are notified that you are being federally prosecuted, you will face relentless confusion and stress. Because you may not have known when you were being criminally investigated, you could have made incriminating statements.

So make sure you contact an experienced IRS criminal investigation attorney as soon as you suspect you are under investigation. We can guide you through the IRS criminal investigation process so you know what to expect.

What Are the Signs of an IRS Criminal Investigation?

You should watch for the following five warning signs that the IRS is conducting a criminal investigation against you:

IRS Agent Goes Quiet

An IRS agent may have been auditing you or pressing you about your taxes. If they suddenly stop and do not return your calls, they could be referring your case to the CID. Once the agent refers your case they will take over without notifying you of the investigation. The agent will cease their activities to not harm the CID’s prosecution.

Your Bank Is Contacted

CID or the U.S. Attorney’s Office could contact your bank to request records using a summons or grand jury subpoena. This is a sign that you need to hire an experienced IRS criminal investigation lawyer. They can help you acquire the same records the IRS received from your bank.

Your Accountant Is Contacted

CID or the U.S. Attorney’s Office could also contact your accountant for your tax records. Your accountant could also be subpoenaed to appear before a grand jury. It’s important to remember that anything you say to your accountant could be used against you. Accountant-client privilege does not apply in criminal cases.

However, conversations with your attorney are protected by attorney-client privilege. You can talk to someone without fear of your words being used in the criminal case against you. Further, your attorney can retain your accountant to protect what you say.

You Understated Income or Overstated Deductions on Tax Returns IRS Is Auditing

The IRS may be auditing your tax returns. If you understated or overstated income or deductions, you could be facing IRS criminal investigation. Once you are aware of any such understatement or overstatement, stop talking to your accountant.

CID Agent Contacts You

A CID special agent could go so far as to call you or show up in person. If so, you should have no doubt that you are under criminal investigation. The agent will want to gather incriminating statements or documents from you. So make sure not to say or do anything without your IRS criminal investigation attorney present. Tell the agent simply that you want to speak with your lawyer.

Talk to a Fairfax VA IRS Tax Attorney Today

If you suspect you’re the subject of an IRS criminal investigation, it’s important to act quickly. An experienced IRS tax attorney can help you protect your rights against the IRS and build a strong defense early. Contact Sodowsky Law Firm, P.C.

The IRS has what is known as a Collection Statute Expiration Date (CSED). Logistically, the CSED is ten years. However, there are a number of waivers and extensions that the IRS can file for to extend the CSED. There are also exceptions to the ten-year rule. Below, we take a look at everything you need to know about the IRS statute of limitations on tax debt.

Ten Years to Collect After Assessment

The IRS has ten years from the date of the assessment to collect back taxes. In cases where you’ve filed a tax return, the date is generally the date of your tax return. If you neglected to file a tax return, the IRS will issue a notice, and the clock will begin ticking down then.

This brings us to a second question:

How Long Does the IRS Have to Assess Your Tax Liabilities?

Generally speaking, the IRS has three years to assess the tax from the date of filing. If you omit items or fail to disclose certain facts, the IRS has six years to assess your tax liabilities.

However, the IRS has an unlimited amount of time to assess a tax if any of the following are true. You:

• Failed to file a return
• Filed a fraudulent return
• Committed tax evasion

The IRS then has ten years after the date of the assessment to begin the collection process. Generally speaking, the IRS will make its most aggressive attempts to pursue outstanding taxes just before the CSED. If the IRS fails to act after the CSED, that money is lost forever.

What If You Didn’t File a Tax Return?

If you didn’t file a tax return, the IRS can begin the assessment process whenever they feel like it. They will have an indefinite period of time to do so. Eventually, they will file a Substitute for Return (SFR) that will assess your tax liabilities for the year or years you did not file. Once the SFR has been filed, the taxes have been assessed. The statute of limitations will begin ticking down then.

What Actions Could Toll or Suspend the IRS Statute of Limitations?

The IRS is legally able to toll the statute of limitations in some cases. This means that they can move the date when the statute of limitations begins ticking down. This effectively buys them more time and allows them to extend the CSED. The events below can toll the statute of limitations for tax debt collection:

Bankruptcy

If you’ve filed for bankruptcy, and the court issues a stay from your creditors, the statute of limitations is suspended during the bankruptcy and an extra six months is added on.

You’ve agreed to repay in installments

If you’ve agreed to a repayment plan, the IRS will not count the days between your request and their decision toward the statute of limitations. If your request is denied or you have stopped making payments, the IRS will add another 30 days to your CSED.

Innocent spouse relief

If you have asked the IRS to forgive a tax debt based on innocent spouse standing, the statute of limitations is tolled for the next 90 days. Additionally, the statute of limitations can be tolled until the court has reached a final decision.

Offer in compromise

If you have asked for an offer in compromise, the IRS will suspend the statute of limitations while your offer is being considered and add an extra 30 days.

CDP hearing

If you have requested a collection due process hearing, the IRS will toll the statute of limitations while the hearing is pending.

Military deferment

If the IRS cannot collect a debt due to military deferment, the statute of limitations is suspended during that period and an extra 270 days are added on to the CSED.

Taxpayer assistance order

If you have filed for a taxpayer assistance order, the IRS tolls the statute of limitations while the case is under review.

Litigation

If you are in litigation with the IRS (usually when the IRS files a lawsuit against you), the statute of limitations is tolled during the lawsuit.

Voluntary Extension of the CSED

As part of bargaining with the IRS, you can offer to extend the CSED. In other words, you can agree to an installment plan which partially repays your taxes on the condition that your CSED is extended, usually, for another five years.

Talk to a Fairfax VA IRS Tax Attorney Today

To learn more about how the IRS statute of limitations applies to your situation, contact Sodowsky Law Firm, PC. We can answer your questions and explain your legal options. Call us today.

As a business owner, you are expected to file and pay your taxes each year. And the IRS knows there’s nothing wrong with trying to pay less in taxes, allowing you to use legitimate strategies to lower your tax burden. But there is a huge difference between using legal tax avoidance tactics and trying to illegally underpay. Understanding the difference between tax avoidance vs. tax evasion can ensure that you avoid committing tax fraud.

What Is Tax Avoidance?

Believe it or not, the IRS has a worksheet that outlines what constitutes legal tax avoidance vs. tax evasion. Essentially, tax avoidance involves using legal IRS programs to reduce your tax burden. It also means keeping accurate records so as to avoid overpaying on your taxes. There are a number of folks out there who pay more money each year than they have to because they don’t keep records of their earnings or because they misunderstand IRS tax codes.

Examples of Tax Avoidance

Federal and state tax codes allow for deductions, credits, and income adjustments that reduce your tax burden. Strategies include:

• Increasing your 401(k) or IRA contributions: Retirement savings are generally not taxed on their way into your retirement accounts (although there are limits on how much you can contribute per year). They are taxed on their way out. Before your total earnings for the pay period are calculated, the money is withheld and deposited into your retirement account. This decreases your overall tax burden.
• Work- or business-related deductions: Within reason, you can make specific deductions for your job. If you work from home, you can claim your office space as a work expense. Tools required for your trade are also deductible. When tax season comes by, you will have to determine if your work deductions exceed the standard deduction. If they do, then having a good accounting of your work deductions will save you money come tax time.
• Tax-smart college funds: If you’re setting up a college fund for your children, you may be able to take this money out of your income before it is taxed and reduce your overall tax burden.
• Home-equity deductions: Homeowners can write off improvements to their primary residence and interest payments on their tax returns.
• Health savings accounts: Some folks set up funds to help them pay for medical expenses. Things like retirement accounts and college funds are subtracted from your check before it is taxed.

What Is Tax Evasion?

When you avoid paying taxes by 1) failing to file at all, 2) hiding taxable income, or 3) fabricating deductions, the IRS can accuse you of tax evasion. In essence, the IRS will charge a taxpayer who avoids assessment or payment with tax evasion after conducting a thorough audit.

To prove tax evasion, the IRS must prove that you knowingly and willfully attempted to deceive the federal government. In other words, an honest mistake is not enough to charge you with tax evasion.

If you are trying to reduce a tax burden that you feel is either unfair or more than you can afford, knowing the difference between tax avoidance vs. tax evasion will help you ensure you don’t commit any illegal acts.

Examples of Tax Evasion

Essentially, if you provide any false or misleading information to the IRS or attempt to hide assets, the IRS can charge you with tax evasion, among other things:

• Underreporting income: If you lie about how much income you’re earning in order to reduce your tax burden, then you’re committing tax evasion.
• Fabricating deductions: One popular way to evade paying your taxes is to claim deductions of expenses that don’t exist. The IRS requires honest reporting of legitimate deductions.
• Failing to file a return: Another common way to avoid paying taxes is by simply failing to file a return. This is still considered tax evasion. You are expected to know that you are required to file taxes.
• Underpaying taxes: You are required to both file the tax returns and to pay the tax returns.

Additionally, businesses have an extra set of obligations and may be charged with tax evasion if they:

• Purposely understate payroll taxes;
• Neglect to withhold payroll taxes such as FICA;
• Hire an outside service to manage their payroll (which does not properly report withholdings to the IRS); or
• Pay employees “under the table” to avoid payroll tax obligations.

Punishments for tax evasion can be stiff. Fines between $250,000 and $500,000 are not uncommon, and neither are jail sentences.

Learn More About the Differences Between Tax Avoidance vs. Tax Evasion

If you need to save money this year, a tax attorney can help. We can also help you resolve problems with the IRS. To learn more, talk to a Fairfax VA tax attorney at Sodowsky Law Firm, P.C. today.