A handful of Internal Revenue Service (IRS) officers have taken inappropriate levy action on Social Security recipients, according to a report by the Treasury Inspector General for Tax Administration (TIGTA). The incorrect levies have caused or worsened economic hardship on these social security inheritors.
Social security welfares are typically the main source of income for low-income taxpayers. The Federal Payment Levy Program (FPLP) allows the IRS to levy certain Federal Payments, which include Social Security benefits. By using the FPLP, the IRS can enforce a continuous levy of 15 percent on Social Security earnings. However, a provision of the Internal Revenue Code requires the IRS to release levies that lead to economic hardship. Additionally, taxpayers can claim a discharge against the levy, which can prevent all or part of the levy issued by the IRS.
In a recent audit against the IRS, TIGTA discovered that many IRS officers inappropriately applied manual levies to Social Security benefits.
When deciding if a levy is the appropriate action to take, IRS officers are advised to consider the taxpayer’s responsiveness, compliance history, effort to pay the tax, and financial condition, which includes information relating to economic hardship factors. For levies against Social Security benefits, IRS officers make decisions on a case-by-case basis.
In 15 percent of the audit’s sample, TIGTA discovered that levies on taxpayers’ Social Security benefits by revenue officers led to, or worsened, economic hardship. Additionally, revenue officers used the wrong form to levy Social Security benefits in 28 percent of the sampled cases. Thus, the IRS failed to consider exemption amounts before enforcing the levy.
The Treasury Inspector General for Tax Administration believes that the IRS needs to adjust its policies and procedures in order to avoid levies when taxpayers are facing economic hardship. TIGTA made five recommendations after its audit, and the IRS agreed to four of them.