Posted on January 7, 2012 by Jonathan Alper

IRS Can Garnish Part Of Social Secruity Check

Social security payments are exempt from garnishment under federal social security statutes. The IRS has collection remedies significantly more powerful than a creditor’s collection tools under state law. A CPA asked me the intersection of social security exemptions and IRS collections: can the IRS garnish a taxpayer’s social security check.

Section 6334 (c) of the Internal Revenue Code (26 U.S.C. 6334 (c)) allows Social Security benefits  to be taken to collect unpaid Federal taxes. If your monthly benefit is more than $750, the IRS  may garnish fifteen percent of your social security  monthly benefit for taxes that are at least six months in arrears. The IRS is required to notify you before it begins to garnish , and you can appeal the garnishment for"hardship.”

This rule is common sense. People who owe the government money should pay their government debt before they receive additional government money.

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Posted on June 3, 2011 by Jonathan Alper

Creditor Cannot Garnish IRS To Get Your Tax Withholding Or Refunds

If you have paid money to the IRS to cover estimated future tax liability, can a judgment creditor ask the IRS to turn over the money the IRS is holding on your account? One of my clients has in his possession a large amount, over $1 million,  of U.S. Savings bonds. He understands that a prospective judgment  creditor may be able to attack the bonds. The client wants to cash out the bonds and take other measures to protect the cash. If he redeems the bonds, he says, the bank will pay the IRS money to cover his estimated tax liability on the savings bond interest. He wants to know if a creditor could get the money the IRS is holding for an uncertain future tax liability.

Federal law prohibits civil judgment creditors from garnishing the IRS. Creditors cannot garnish tax refunds in the IRS’s possession. Some debtors seek protection of cash by advance payment, or overpayment, of future tax liability. In bankruptcy, a prospective tax refund is property of your bankruptcy estate and must be turned over to the bankruptcy trustee when received from the IRS. A trustee cannot take the money from the IRS before the refund is issued to the debtor.
 

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