Can You Collect Social Security If You Owe the IRS?
When someone owes back taxes to the Internal Revenue Service, it is common for the IRS to take some types of government payments automatically, such as federal tax refunds, to pay down the debt. Social Security benefits are another type of federal government payment the IRS is allowed to apply toward your debt, but only a certain percentage of your benefit may be taken, and only after the IRS has followed certain procedures. You also have the option of making other arrangements to satisfy your tax bill, rather than sacrifice your Social Security payments.
If you're eligible to receive Social Security benefits, your tax debt does not affect your eligibility, or the amount of benefits the Social Security Administration calculates for you. You may still collect the benefits the agency determines you should receive. Although the IRS may be able to take a portion of your payment, you will notice any IRS payments as a deduction from your benefit check, similar to taxes or other deductions you might have withheld from a paycheck. This does not change the gross amount of benefit you're scheduled to receive. IRS entitlement to your benefits is not automatic when you owe taxes, so you may not immediately notice a deduction for back tax debt when you start receiving benefit payments.
Although your benefit eligibility is not affected by your tax debt, the IRS is allowed to take a percentage of your benefits through the Federal Payment Levy Program. Under this program, the IRS may take up to 15 percent of your Social Security benefits each time you receive them and apply the amount toward your tax debt. However, before the 15 percent garnishment can start, the IRS must make attempts to contact you in writing regarding your debt and give you an opportunity to make other payment arrangements.
In addition to other letters you may receive concerning your tax bill, before the IRS can garnish any portion of your Social Security benefits, it must mail you a final notice of intent to levy your benefits. This letter will state it is a "final notice," and it will have a CP 91 or CP 298 letter number in the corner. If you receive this notice, you have 30 days to submit an appeal. If you do not submit an appeal within 30 days, the IRS may start levying your benefits at any time. An appeal form and instructions on how to submit an appeal are included with your CP 91 or CP 298 notice from the IRS.
Whether you receive a final notice of intent to levy or not, if you are receiving or expect to receive Social Security benefits and know you owe the IRS, it is to your advantage to make other arrangements with the IRS to resolve your debt. Installment agreements that allow you to make monthly payments toward the amount you owe are available, and are typically set up based on the amount you can afford to pay each month. If your monthly expenses are more than your monthly income, including your benefits, you may qualify for a "noncollectible9quot; status with the IRS. This status does not eliminate what you owe, but you aren't required to make any payments toward your debt while in the status. It also prevents the IRS from attaching your benefits, bank accounts or other sources of income to pay your bill. Contact the IRS at 1-800-829-1040 to establish a payment plan or to seek "noncollectible9quot; status.
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.
Will Money Owed on State Taxes Stop My Federal Refund?
When you file your federal taxes and are owed a refund, you may not get that refund in your pocket if you owe the state or federal government money. The Department of Treasury's Financial Management Service, which issues refunds to taxpayers, conducts the Treasury Offset Program. The program could result in your refund being reduced by the amount you owe in state taxes.
The Department of Treasury's Financial Management Service is authorized by Congress to reduce tax refunds for past-due child support, federal agency non-tax debts, some unemployment compensation debts owed to a state -- usually as a result of fraud, or state income tax obligations. In order for your tax refund to be reduced for a state tax debt, it has to be reported as a delinquent or overdue debt to the Department of Treasury's Financial Management Service.
If your refund is withheld or reduced to pay a state tax obligation, you'll receive an offset notice in the mail from the Department of Treasury's Financial Management Service. The notice will tell you how much your refund was and how much was offset to pay the state tax debt due. The notice will also give you the name and address of the agency that requested the offset. If your refund was withheld or reduced for a state tax debt, the name and address will likely be your state tax agency.
If you think your federal tax refund may be withheld to pay delinquent or past due state taxes, you can contact your state taxation office to find out how much will be withheld. It may be possible to pay the overdue taxes or come up with a payment plan to prevent the offset, depending on which state you live in. If your refund is offset, the Department of Treasury will send the offset amount to the state tax department and send you the remainder, either via check or direct deposit -- depending upon your chosen refund method.
If you filed a joint return with your spouse and your joint tax refund was withheld due a debt owed by your spouse and not by you, you can claim back your portion of the tax refund by filling out Form 8379, Injured Spouse Allocation (see Resources). If you know that an offset is going to occur, you can submit the form with your federal taxes. Otherwise, you can file the form by itself.
Floyd Mayweather owes 2015 federal taxes, asks for installment plan
David Greisman of BoxingScene.com reports that Mayweather still owes federal taxes for 2015 and is petitioning the U.S. Tax Court for an installment agreement, specifically citing what appears to be his scheduled Aug. 26 clash with MMA superstar Conor McGregor as a “significant liquidity event” from which he intends to pay the remaining balance.
Boxing Scene cites a Law360 report describing the apparent dispute between Mayweather and the IRS. “The agency said that Mayweather had various options available … including by selling property, withdrawing cash from other accounts or taking out a loan.”
In other words, Mayweather argues he’s too illiquid to immediately pay his 2015 taxes while the IRS believes some of his assets could be converted into cash or Mayweather could take out a loan to pay what he owes.
2015 is the year Mayweather reportedly earned $220-230 million for defeating Manny Pacquiao in what was billed as boxing’s Fight of the Century. Once the McGregor clash takes place towards the end of the summer, Mayweather will now have to pay taxes on a possible $400 million in earnings as well as cover his past IRS debts