SSI vs. Social Security: Which Benefits the IRS Can Levy

People use "Social Security" to mean any payment from the Social Security Administration. The IRS does not. For levy purposes, it splits SSA payments into two programs, and the difference decides whether the IRS can take part of your check.

The two programs

Old-Age, Survivors, and Disability Insurance (OASDI) is what most people call Social Security: retirement benefits, survivor benefits, and Social Security Disability Insurance (SSDI). You earned it by paying payroll taxes. It is reported to you and the IRS each January on Form SSA-1099.

Supplemental Security Income (SSI) is a needs-based program for people who are 65 or older, blind, or disabled and have limited income and resources. It is paid under Title XVI of the Social Security Act. It is not taxable and does not appear on an SSA-1099.

IRM 5.11.6.2.1 states the distinction directly: OASDI payments are not based on need, and they can be levied. SSI payments are exempt under IRC 6334(a)(11).

Why SSI is protected

Section 6334(a)(11) exempts from levy any amount payable to an individual as a recipient of public assistance under Title IV or Title XVI of the Social Security Act, and under state or local public assistance programs that use a needs or income test. SSI is Title XVI.

There is a wrinkle. Section 6331(h), the 15 percent continuous levy, applies "notwithstanding section 6334," and its definition of specified payments includes payments described in 6334(a)(11). So on paper, the statute would allow a 15 percent levy on SSI. The IRS has chosen not to use it. IRM 5.11.6.2.1 says that although 6331(h) permits the IRS to levy up to 15 percent of SSI payments, the IRS will not pursue these levy sources at this time.

"At this time" is policy language, not a statutory promise. For now, SSI recipients are not in the Federal Payment Levy Program for their SSI.

Why Social Security retirement and SSDI are not protected

Section 207 of the Social Security Act protects benefits from execution, levy, attachment, and garnishment by most creditors. Section 6334(c) of the Internal Revenue Code overrides it by name: "Notwithstanding any other law of the United States (including section 207 of the Social Security Act), no property or rights to property shall be exempt from levy other than the property specifically made exempt by subsection (a)."

OASDI benefits are not on the 6334(a) list. So the IRS can reach them two ways: up to 15 percent through the automated Federal Payment Levy Program under 6331(h), or a paper levy served on SSA by a Revenue Officer, which leaves you only the exempt amount computed under 6334(a)(9) and (d). The mechanics are in the IRS 15% Social Security levy explained.

SSDI gets no special treatment. It is an OASDI benefit, so it is levyable, even though the recipient is disabled.

Other federal and state benefits retirees receive

The Railroad Retirement line surprises people. Section 6334(a)(6) exempts Railroad Retirement annuities from levy, and IRM 5.11.6.2.4 says Revenue Officers will not pursue paper levies on them. But 6331(h)(2)(C) makes them specified payments, and the IRS has used the 15 percent FPLP levy on Railroad Retirement Board benefits since July 2011.

For a broader list, see what the IRS cannot take from a retiree.

When you receive both SSI and Social Security

Some people receive a small Social Security benefit plus SSI to bring them up to the federal benefit level. The Social Security portion is reported on the SSA-1099 and is levyable. The SSI portion is not. In practice, a person whose income is low enough to qualify for SSI will usually fall under the FPLP low income filter in IRM 5.11.7.3.2.3, which excludes Social Security recipients whose estimated total income is below 250 percent of the federal poverty guidelines. If you get both and were levied anyway, the IRS's income estimate is probably wrong. Show them your real numbers.

Proving what you receive

When you ask the IRS to correct a levy on an exempt benefit, documents decide the outcome. The IRS employee on the phone cannot see your SSA award letter, and SSA will not tell the IRS why a benefit changed. IRM 5.11.6.2.1 notes that privacy laws restrict what SSA can disclose, even to the IRS office that issued the levy.

Keep these together in one folder:

• Your current SSA benefit letter, which shows whether a payment is Social Security (Title II) or SSI (Title XVI).
• Your most recent Form SSA-1099. SSI is not reported on it, which itself helps show which payments are which.
• VA award letters showing service-connected disability compensation, if you receive it.
• Bank statements showing the deposit descriptions for each benefit.

With those in hand, a mistaken levy on a protected benefit is usually a paperwork problem, not a legal fight.

A representative payee's own tax debt

If you are a representative payee managing benefits for a parent or other beneficiary, those benefits belong to the beneficiary. IRM 5.11.6.2.1 says they are not available for levy for the payee's own tax debts. If a payee's IRS problem results in a levy on a beneficiary's money, that is a wrongful levy, and the remedy is a claim under IRC 6343(b).

Spouses and community property

Florida is not a community property state, but many retirees moved here from one. IRM 5.11.6.2.1 notes that Social Security benefits are not community property and the IRS cannot levy a non-liable spouse's Social Security on a community property theory. Each spouse's benefit stands on its own. If only one spouse owes, only that spouse's benefit is at risk. On a joint liability, both are.

Money in the bank is a different question

Everything above concerns the payment on its way from the government. Once SSI or Social Security is deposited in your bank account, it is money in a bank account, and a bank levy under Form 668-A is a different process. Treasury's two-month protection rule for federal benefits in bank accounts generally does not apply when the United States is the one levying. Read Social Security in the bank: why the two-month rule does not stop the IRS.

What to do if a protected benefit was levied

If SSI, VA disability, or another exempt payment was taken, call the IRS number on the levy notice, identify the payment as exempt under the specific 6334(a) paragraph, and request release and return. Keep copies of your award letters. If a deposit account was levied and it held only exempt benefits, say so in writing and include bank statements showing the deposits.

If you want help sorting out which of your benefits are exposed, call (813) 229-7100. If the levy is already in place, see how to stop or release an IRS Social Security levy. The firm's overview of IRS tax levies covers the rest of the levy landscape.