If you are currently on disability and receiving Social Security Disability monthly or lump sum benefits, you have to pay back taxes. If possible, you can pay off your tax debt and avoid having your benefits garnished or withheld. For most people on disability, this is not likely to be a readily available option.
The Internal Revenue Service (IRS) will garnish your benefits or withhold a portion for as long as it takes to satisfy the back taxes you owe. This decrease in benefits can have a significant impact on your ability to meet your monthly housing, nutrition, and personal care needs. A Social Security Disability lawyer in your area can help you explore additional relief options.
Table of Contents
- The IRS Can Garnish Your Disability Benefits to Pay Back Taxes
- Are There Any Non-Garnishment Options to Pay or Reduce Back Taxes?
- Can the IRS Fresh Start Program Offer Relief From Garnishment or Seizure?
- Get Help Retaining Your SSDI Disability Benefits
For a legal consultation with a lawyer serving North Carolina and South Carolina, call 828.286.3866
The IRS Can Garnish Your Social Security Disability Benefits to Pay Back Taxes
Having your payments garnished means the IRS will seize a portion of your Social Security Disability benefits. Benefits garnishment will:
- Withdraw a portion of your benefits before it ever reaches your hands
- Apply the seized portion of your benefits to your back taxes until it is paid in full
A garnishment is a court-mandated, legal process that can be difficult to challenge or overcome on your own. It could also create financial hardship throughout its duration.
How Much Can the IRS Take When It Garnishes Disability Benefits?
If you are represented by a Social Security Disability lawyer, they will explain the garnishment and withholding process to you in detail. According to IRS guidelines, the government will seize up to 15% of your benefits.
Accordingly, benefits garnishment can mean a monthly disability payment of $1,300 will be reduced to $1,105. If you are represented by a lawyer, they can help you negotiate with the IRS. You might also be eligible for tax relief programs that can help you avoid garnishment or protect your disability income.
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Are There Any Non-Garnishment Options to Pay or Reduce Back Taxes?
If your tax debt is significant, it could be difficult or impossible to overcome or settle on your own. As noted, an attorney in your area can explain how you can prevent a significant reduction in the benefits you rely on. They may suggest:
Acknowledging and Paying Your Back Taxes
Ignoring your tax debt is not a viable option for getting out from under it. The IRS will not stop pursuing the taxes you owe––nor can you dispute the debt or have it removed from your credit report. In most cases, your debt will remain until the IRS recoups payment.
Do not ignore letters from the IRS or discard them. Share them with your lawyer who can help you find ways to avoid financial upheaval and navigate your federal taxes.
Filing for Bankruptcy
Filing for bankruptcy could help you in multiple ways. It can discharge your back taxes or lead you toward other relief options. A bankruptcy filing will also give you an automatic stay, which can stop the IRS and other creditors listed in your bankruptcy application from contacting you about your debt.
Can the IRS Fresh Start Program Offer Relief from Garnishment or Seizure?
Tax debt is serious and, in many cases, permanent. The IRS itself, though, offers some options through its Fresh Start Program, sometimes called the IRS Fresh Start Initiative or Fresh Start Tax Relief Program. It is not a single program—rather, it is a series of programs that can help you and the IRS reach an agreement to satisfy your unpaid taxes.
Its programs include:
- Offer in compromise (OIC): This option allows you to settle your IRS debt for less than you owe in back taxes
- Payment plans and installment agreements: This option allows you to make affordable payments that settle your debt.
- Currently not collectible or hardship status: This option allows you to defer payment of your back taxes until your financial circumstances improve.
- Penalty abatement: This option allows you to seek relief from additional financial penalties that might otherwise accrue while your IRS debt remains outstanding.
- Tax lien relief: This option allows you to have any liens relieved once your tax debt has been paid.
Program eligibility depends on the amount of taxes you owe. IRS administrators will work with you to assess your current financial situation and determine the best available option.
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How Can a Social Security Lawyer Help Avoid or Stop Garnishment?
The prospect of having your disability benefits garnished can be daunting and upsetting. When the garnishment happens, it can make living on a fixed income even more difficult than it already is.
If you are represented by a Social Security Disability lawyer, they will:
- Review your current disability benefits and taxable income
- Examine any and all IRS correspondence related to the back taxes you owe
- Document your current financial standing and realistic ability to satisfy your back taxes
- Explain which Fresh Start Initiative programs are the right fit for your situation
- Help you avoid a lien on any real estate or other property you own
- Obtain, complete, and submit all paperwork and financial information your application for relief requires
- Answer any questions you have regarding your tax return and disability income
You do not have to accept a levy or garnishment of your disability benefits without fighting back. Your lawyer will help you navigate this complex system and get the financial relief you need.
Call to Learn More About Social Security Disability Benefits
You must pay back taxes while on disability, which can create a challenging financial situation. If you are on disability and need help understanding your IRS debt relief options, an attorney at Farmer & Morris Law, PLLC will review them with you.
Contact one of our Social Security Disability team members for your free case review and learn more about our commitment to excellence.