Do IRS Levies on Social Security Benefits Survive the Statute of Limitations?

Owing significant back taxes to the IRS requires the expertise of an IRS tax debt lawyer. Without representation, delinquent taxpayers remain subject to IRS collections tactics that are the stuff of nightmares, including wage garnishments, property seizures, and tax levies on up to 100% of Social Security benefits.

Thankfully for many insolvent taxpayers, the Internal Revenue Code establishes a 10-year time limit on collections. However, Congress exempted Social Security benefits from this limitation, as Ward Dean learned when he sought relief in federal court. The court disagreed with Dean’s argument that he was entitled to relief from an IRS levy of his Social Security benefits because the collection statute expiration date (CSED) had passed.

What is the CSED?

The CSED limits the IRS’s authority to collect back taxes to ten years after their assessment. Assessment of back taxes occurs when a taxpayer files a return (or the IRS files a substitute return).

The IRS does everything within its power to collect back taxes before the CSED. Absent a negotiated settlement with the IRS, delinquent taxpayers often face heavy-handed collection tactics as the CSED nears.

Common Extensions of the CSED

In some cases, the CSED functions as a movable goal post. The law allows extensions of the CSED for many reasons, including when the taxpayer takes these actions:

  • Declares bankruptcy
  • Files an Offer in Compromise request
  • Files certain appeals
  • Leaves the country for six or more consecutive months
  • Signs a waiver of the CSED
  • Requests an installment agreement

Taxpayers with substantial back tax debt should consult a tax litigation attorney before taking any of these actions.

What Happens to Tax Liens After the CSED?

The IRS routinely files liens against the property (and all future property) of delinquent taxpayers. These liens serve as a precursor to the IRS seizing a taxpayer’s property, such as homes and vehicles. Thankfully for those who owe back federal taxes, the IRS must release all liens upon the arrival of the CSED.

Most Levies are Forbidden After the CSED

Levies involve the seizure of money or property. For example, the IRS often levies bank accounts, allowing it to remove some or all of the balance and apply it to overdue tax bills. In other cases, it levies wages in the form of garnishment. The IRS must refrain from bank levies and wage garnishments upon the arrival of the CSED.

Levies Against Social Security Benefits Survive the CSED

Though a form of income, Social Security benefits fall under a different set of CSED rules than wages. In the Dean case, we see that federal law considers Social Security benefits as property rather than as wages. Because of this, the IRS can continue levies against these benefits provided it placed the levy before the CSED.

In affirming the district court’s decision in Dean, the appeals court wrote:

"a levy on a fixed and determinable right to payment which right
includes payments to be made after the period of limitations expires does not
become unenforceable upon the expiration of the period of limitations and will not
be released under this condition unless the liability is satisfied." Id. 301.6343-1(b)(1)(ii).

The Danger of Social Security Benefit Levies

The IRS can levy 100% of Social Security benefits. For many delinquent taxpayers, this creates an undue hardship. However, hope still exists for taxpayers facing a situation similar to Dean’s. Through a skilled tax trial lawyer, distressed taxpayers can plead hardship or otherwise negotiate a settlement with the IRS that prevents the seizure of Social Security benefits.

If you are facing IRS liens and levies, contact Brager Tax Law Group to discover your options for preserving the financial security you have earned.

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