A potential client recently contact me over concern whether her VA benefits and social security payments could be levied upon by the IRS to satisfy delinquent federal tax. Here is my response.
Question: Are VA benefits subject to IRS levy for delinquent federal taxes?
Internal Revenue Code exempts from IRS levy:
IRC § 6334(a)(10) Certain service-connected disability payments. Any amount payable to an individual as a service-connected (within the meaning of section 101(16) of title 38, United States Code) disability benefit under—
(A)subchapter II, III, IV, V, or VI of chapter 11 of such title 38, or
(B)chapter 13, 21, 23, 31, 32, 34, 35, 37, or 39 of such title 38.
Wading through the lengthy citations to other statutes referenced in IRC § 6334(a), the referenced service-connected disability payments includes Veterans Administration disability payments. See, e.g., Maehr v. Koskinen, 664 F. App’x 683, 684 (10th Cir. 2016), holding that Veterans Administration disability payments are statutorily exempt from an IRS tax levy.
Question: Are Social Security Payments subject to IRS levy for delinquent federal taxes?
IRC § 6331(h) permits the IRS to levy on what the statute terms “specified payments” in a continuing levy amount of up to 15%. “Specified payments” is defined to include “any Federal payment other than a payment for which eligibility is based on the income or assets (or both) of a payee.”[1] This federal payment includes social security payments.
The legislative history of § 6331(h) specifies that social security is included within the federal payment: [2]
The provision amends the Code to provide that a continuous levy is also applicable to non-means tested recurring Federal payments. This is defined as a Federal payment for which eligibility is not based on the income and/or assets of a payee. For example, Social Security payments, which are subject to levy under present law, would become subject to continuous levy. . . . A continuous levy of up to 15 percent would also apply to unemployment benefits and means-tested public assistance.[3]
Thus, social security payments may be levied by the IRS for up to 15% of the payment.
Please contact Jared Le Fevre if you have questions about tax liens.
Jared M. Le Fevre is a tax attorney and partner in the Tax, Trusts and Estates Practice Group of Crowley Fleck PLLP. Mr. Le Fevre represents taxpayers before the IRS, IRS Independent Office of Appeals, Tax Court, Federal District Court and state tax agencies throughout Montana, Wyoming, North Dakota, Idaho, and Utah. Mr. Le Fevre is involved in federal and state and local tax audits, appeals, and tax resolution throughout these western states. Mr. Le Fevre also advises clients on the tax effects of business and real estate transactions.
[1] § IRC 6331(h)(2).
[2] Elliott: Federal Tax Collections, Liens & Levies (WG&L), ¶ 13.03.
[3] R Rep. 105-148, HR Rep. No. 148, 105th Cong., 1st Sess. 1997, at 478.