IRS Targeting Social Security: What You Need to Know

There's a new concern that's been causing quite a buzz among retirees and those nearing retirement: the possibility of the IRS targeting Social Security benefits. This issue has raised many questions and instilled a sense of anxiety among those who rely on these benefits for their day-to-day living expenses. Is your Social Security check at risk? Heres everything you need to know about this hot-button topic.

Understanding the Basics

The IRS and Social Security Administration (SSA) are two separate entities with distinct roles. While the SSA administers Social Security benefits, the IRS is responsible for tax collection and enforcement. Under normal circumstances, Social Security benefits are designed to support retirees, disabled individuals, and others who qualify. However, there are specific situations where the IRS might have a claim on these benefits.

Why the IRS Might Target Your Social Security

There are several reasons the IRS may target your Social Security benefits:

• Unpaid Taxes: If you owe federal taxes, the IRS has the authority to garnish your Social Security benefits to settle your debt. This process, known as the Federal Payment Levy Program (FPLP), allows the IRS to take up to 15% of your monthly Social Security payment.
• Overpayment Recovery: If the SSA overpaid you in the past, they could reduce your current or future benefits to recover the overpaid amount. This isnt directly an IRS action but can have similar financial impacts.
• Student Loans: Surprisingly, unpaid federal student loans can also result in garnishment of Social Security benefits.
• Other Federal Debts: Default on other federal debts, such as defaulted FHA loans, can also lead to a reduction in benefits.
• Tax Evasion: If you have attempted to evade taxes, the IRS can take aggressive steps, including garnishing Social Security to recover owed amounts.

Who is Most at Risk?

While many individuals might feel anxious about this development, certain groups are more vulnerable:

• Taxpayers with Outstanding Debts: Those who have unpaid federal taxes are at a significantly higher risk of having their Social Security benefits garnished.
• Low-Income Retirees: Ironically, garnishments might hit low-income retirees the hardest, even though they are the ones most dependent on these benefits for their daily expenses.
• People with Federal Loans: As mentioned earlier, outstanding student loans and other federal obligations can put one's benefits at risk.

How to Protect Your Social Security Benefits

Prevention is better than cure. Here are steps you can take to safeguard your Social Security benefits:

• Timely Payment of Taxes: Ensure that your federal taxes are always paid on time. Setting up an installment agreement with the IRS can help manage any unpaid dues.
• Address Overpayments: If you've been overpaid by the SSA, address the issue immediately to avoid future benefit reductions.
• Manage Federal Debts: Stay current on federal loans and other government-related obligations.
• Financial Counseling: Consider professional financial counseling to create a strategy for managing debts and obligations effectively.
• Claim Hardship Exemption: If garnishment would cause significant financial hardship, you can apply for an exemption. The IRS does provide avenues for those in genuine difficulty, but the process is stringent.

Final Thoughts

While the prospect of the IRS targeting Social Security benefits can be distressing, understanding the specific circumstances and taking proactive steps to manage your finances can significantly reduce your risk. Remember, knowledge is power. By staying informed and proactive, you can safeguard your retirement income.

For more tips and strategies on how to save on taxes and ensure your benefits are protected, consider setting up a call with our expert team. Click on the link below to schedule a consultation:

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