The IRS 15% Social Security Levy: How the FPLP Works

Most retirees assume Social Security is untouchable. It isn't. Congress gave the IRS a specific tool to reach it, and the IRS uses that tool through an automated computer match that runs every week. No Revenue Officer knocks on your door. Your deposit simply shows up smaller.

The tool is the Federal Payment Levy Program, usually called the FPLP. The law behind it is Internal Revenue Code section 6331(h). Once you understand how the program decides who gets levied and how a levy gets released, you stop feeling helpless and start making decisions.

What the law actually allows

Section 6331(h) lets the IRS impose a continuous levy of up to 15 percent on "specified payments." Social Security retirement, survivor, and disability benefits are specified payments. So are Railroad Retirement annuities. The statute says the levy attaches "notwithstanding section 6334," which is the section listing property exempt from levy. In plain English: the usual exemptions do not protect you from the 15 percent.

Section 6334(c) closes the other door. It says that, notwithstanding any other law of the United States, including section 207 of the Social Security Act, nothing is exempt from IRS levy unless section 6334(a) lists it. Section 207 is the anti-garnishment rule that stops most creditors from touching Social Security. It does not stop the IRS.

The levy is continuous. It does not stop after one payment. It keeps taking up to 15 percent of every monthly benefit until the debt is paid, the collection statute runs out, or the IRS releases it.

How the FPLP finds you

The program is a partnership between the IRS and the Treasury's Bureau of the Fiscal Service (BFS), which disburses federal payments. The IRS sends BFS a file of taxpayers with balances in certain collection statuses. BFS matches those Social Security numbers against the payments it is about to make. When a match hits, BFS keeps up to 15 percent and sends the rest to you, along with its own notice that the payment was levied.

The IRS describes the selection and exclusion rules in IRM 5.11.7, Automated Levy Programs. A few points matter for retirees:

• You must have received a Collection Due Process notice first. Before any levy, IRC 6330 requires a written notice of your right to a hearing at least 30 days ahead. For most people that was a CP90, an LT11, or a Letter 1058.
• Then comes a CP91. For Social Security matches, the IRS sends an additional notice, the CP91, titled as an intent to seize up to 15 percent of your Social Security benefits. Under IRM 5.11.7, the levy is transmitted to BFS at least eight weeks but no more than 26 weeks after the CP91 issues. I cover that notice in detail in CP91: the final notice before the IRS levies Social Security.
• There is a low income filter. IRM 5.11.7.3.2.3 excludes taxpayers who receive Social Security, military retirement, or Railroad Retirement benefits from the FPLP if their estimated total income falls below 250 percent of the federal poverty guidelines. The IRS estimates your income from your latest return or from information returns. If the estimate is wrong, you can be levied anyway, and you will have to show the IRS your real numbers.
• Certain account statuses block the levy. A pending or active installment agreement, a pending offer in compromise, a hardship (currently not collectible) closure, bankruptcy, and federally declared disaster codes are on the exclusion list in Exhibit 5.11.7-3.

FPLP levy versus a paper levy

There are two ways the IRS can go after Social Security, and they are not the same.

IRM 5.11.6.2.1 tells Revenue Officers to use discretion with Social Security and, generally, to look at other levy sources first. The paper levy is rarer. But it can take far more than 15 percent, because it only leaves you the exempt amount. If you are dealing with a Revenue Officer and have Social Security income, the 15 percent FPLP is not the ceiling of your risk.

What 15 percent does to a fixed budget

Say a retiree in Seminole receives $2,200 a month in Social Security. Fifteen percent is $330. That is a utility bill and a prescription copay, every month, with no end date. For a household already at the edge, the FPLP turns a manageable tax debt into a monthly crisis.

That is exactly why the law gives you ways out. The levy is a collection tool, not a punishment, and the IRS has to release it in specific situations.

How the levy gets turned off

The FPLP is released when something posts to your IRS account that excludes you from the program. The main ones:

1. An installment agreement. IRC 6343(a)(1)(C) requires release when you enter an installment agreement under section 6159, unless the agreement says otherwise. Section 6331(k) also bars levy while a proposed agreement is pending.
2. Economic hardship. IRC 6343(a)(1)(D) and Treas. Reg. 301.6343-1(b)(4) require release when the levy leaves you unable to pay reasonable basic living expenses. The IRS weighs your age, medical costs, and the cost of living where you live.
3. An offer in compromise. Once the IRS accepts an offer for processing, levy is barred under 6331(k)(1). Read offers in compromise for retirees on fixed income before you file one.
4. Paying the balance or the collection statute expiring. The FPLP systemically releases before the collection statute expiration date.

Timing matters. IRM 5.11.7 explains that the release code has to reach BFS before its processing cutoff for the next payment. Get a release on the right day and your next check is whole. Get it a few days late and one more payment is levied. When a levy is released for hardship or because you entered an installment agreement, the IRM says the levied payment may be returned to you, and it is generally in the government's interest to do so. Ask for it.

The step-by-step version is in how to stop or release an IRS Social Security levy.

Calling Social Security will not help

The IRS says it plainly on its CP91 page: do not contact the Social Security Administration about the levy. SSA cannot stop it and cannot resolve the tax issue. SSA is just the paying agency. The only party that can release an FPLP levy is the IRS.

What does not count as Social Security

Supplemental Security Income is a different program. It is needs-based, it is exempt under IRC 6334(a)(11), and IRM 5.11.6.2.1 says the IRS will not pursue SSI payments through the FPLP at this time. If you receive SSI and think it was levied, read SSI vs. Social Security: which benefits the IRS can levy.

Also know this: if your benefit lands in a bank account, the money in the account can be hit by a separate bank levy. That is a different process with different rules. See Social Security in the bank.

What to do this week

Get your IRS account transcripts for each year you owe. Confirm which notices were sent and when. Figure out which release path fits your finances: payment plan, hardship, or offer. Then make the request before the next BFS cutoff, not after.

If you would rather not do that alone, call me at (813) 229-7100. For an overview of how IRS levies work generally, the firm's main site has a page on IRS tax levies. Fifteen percent is a lot of money to lose while you wait.