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Asked by sparkywarner - 7 years ago
I owe back taxes and have been contacted by the IRS. They are requesting approx. $150k. I have total permanent disability due to Chondrosarcoma (bone cancer) 7 years ago. I had my right arm amputated. My private Disability Insurance company paid off and am receiving Social Security Disability income.

I did not file taxes on this money due to being informed by my old accountant it was not taxable due to loss of limb. Well the IRS didn't agree and has contacted me 7 years later. My question is can the IRS garnish my SSDI and Third party Disability income? If so how much %.I am reading that the income is exempt from judgments in certain states. Does that apply to IRS?
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kc5255 Level 38 / Out of the Workforce
Answered 7 years ago
I have always kept this on my computer for reference. This may help you. I just went through a garnish from my SS benefits. But it was another government agency (Student Loans)

Section 207 of the Social Security Act (42 U.S.C. 407) protects Social Security benefits from assignment, levy, or garnishment. However, the law provides five exceptions:

Section 459 of the Act (42 U.S.C. 659) allows Social Security benefits to be garnished to enforce child support and/or alimony obligations;

Section 6334 (c) of the Internal Revenue Code (26 U.S.C. 6334 (c)) allows benefits to be levied to collect unpaid Federal taxes;
Section 3402 (P) of the Internal Revenue Code allows beneficiaries to elect to have a percentage of their benefits withheld and paid to the Internal Revenue Service to satisfy their Federal income tax liability for the current year;
The Debt Collection Act of 1996 (Public Law 104-134) allows benefits to be withheld and paid to another Federal agency to pay a non-tax debt the beneficiary owes to that agency: and
The Tax Payer Relief Act of 1997 (Public Law 105-34) authorizes the Internal Revenue Service to collect overdue federal tax debts of beneficiaries by levying up to 15 percent of each monthly payment until the debt is paid.

The Social Security Administration's responsibility for protecting benefits against legal process and assignment usually ends when the beneficiary is paid. However, once paid, benefits continue to be protected under section 207 of the Act as long as they are identifiable as Social Security benefits using normal banking practices. For example, only social security benefits are deposited into a particular bank account.

If a creditor tries to garnish your social security check, inform them that unless one of the five exceptions apply, your benefits can not be garnished. You also may want to provide this same information to your financial institution and seek legal assistance if you believe it is needed.
Additional Details added 7 years ago
I found this online

Can the IRS take any of my Social Security Disability?

Federal law makes Social Security benefits exempt from levy, garnishment, and assignment- 42 USC 407(a) states. "In general the right of any future payments under this sub chapter SHALL NOT be Transferable or assignable. AND NONE of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levey, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law".
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deenava Level 2
Answered 3 years ago
Yes the Social Security can be garnished, the best thing to do is complete Form 9465 Installment Agreement Request if she can afford to pay.
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