Myles Haverluck says taxpayers receiving social security benefits are the most vulnerable for an income tax levy. They are also the most uninformed on obtaining a tax levy release.
Social security benefits are the most common source of payments from the government and likely, the only source of income for most elderly recipients. Federal benefits are also the easiest source of a federal tax levy.
In 1997, Congress approved the Federal Tax Levy Program, providing the IRS authority to seize federal benefits. When social security payments are levied, it remains in place until all back debt is paid, or taxpayers usually contact the IRS to set up an installment plan.
Easier to Target The Vulnerable
According to Myles Haverluck, when the federal tax levy program was set up, it was not suppose to include low-income taxpayers, especially those on a fixed income. It was agreed that IRS software would filter out those taxpayers who did not meet a set income level. Haverluck say, guess what? The software never worked properly.
The truth be told, it is easier to target retirees when seeking levies. Retirees are most likely receiving federal benefits, annuity payments, IRA distributions, as well as a 401k. It’s very unlikely a retiree could walk away and distance themselves from this form of benefits. The vulnerability is greater. All of these retirement benefits are subject to an IRS tax levy and, they are easier to find as you get older.
Haverluck points out, retirees age in place; at a certain point, they stop moving accounts around and become more settled. The IRS collects, on average, about $400 million, just from an income tax levy on federal benefits.
Negotiating other options for Social Security Recipients
There are retirees with assets other than social security income. These assets are also subject to a federal tax levy, unless taxpayers negotiate with the IRS. Negotiations can be challenging for those not well-versed in the tax code, and not aware of their rights. Never expect the internal revenue service to offer an alternate solution for an income tax levy, other than a payment plan. Haverluck says taxpayers should contact a tax professional, preferably an enrolled IRS agent who has the level of experience required because sooner or later, the IRS does catch up to you.