When you find out that the IRS can take money from your bank account, that is a scary moment. The thought of losing money you’ve set aside for rent, groceries, or other needs can make an already stressful situation feel overwhelming.
But the IRS cannot take every type of income without limits. That means you may have options if a levy threatens your ability to pay for necessities.
So, what money can the IRS not take from your account? Here is a look at those limits so you can figure out your next steps.
What Money Is Protected from the IRS?
Federal law protects certain types of income and property from IRS levies. These protected funds may include:
- Unemployment benefits
- Workers’ compensation
- Certain disability benefits
- Certain public assistance payments
- Certain pensions and retirement benefits
- Certain funds needed to pay child support
These protections can help if you’re worried about how you will cover your everyday expenses. However, the rules depend on the specific benefit or payment you receive. Not every type of disability, retirement, or assistance payment receives the same protection.
Can the IRS Take Your Social Security Benefits?
If Social Security is your main source of income, this depends on the type of benefit you receive. The IRS can collect up to 15% of qualifying Social Security retirement and survivor benefits through the Federal Payment Levy Program. However, Supplemental Security Income (SSI) is excluded from that automated levy program.
If you receive a notice that the IRS intends to levy your benefits, you still might have options. You may be able to explore ways to address the tax debt or request a levy release if collection is creating an economic hardship.
Can the IRS Take Money from Your Bank Account?
Yes, the IRS can levy your bank account if you owe federal taxes and the IRS follows the required collection procedures. When your bank receives an IRS bank levy, it must freeze the funds subject to the levy and hold them for 21 days before sending them to the IRS. That waiting period gives you time to review the situation and take action.
But what if the money in your account comes from Social Security, disability payments, or another source you believe is protected?
Some income is specifically exempt from a levy, but depositing money into a bank account can cause some issues. If you believe your account contains protected money, you need to collect your bank statements and benefit records. These documents may help show where the money came from and help with a request to challenge the levy or have funds released.
What If an IRS Levy Means You Can’t Pay Your Bills?
Sometimes, the biggest problem is not the tax debt. It’s what happens when the IRS starts collecting it. If an IRS levy leaves you unable to afford basic living expenses, you may be able to request that the IRS release it because of economic hardship.
There are some other options that may help you address the underlying tax debt. These include:
- Installment agreement: If you qualify, you may be able to pay your tax debt over time.
- Offer in Compromise: You may qualify to settle your tax debt for less than the full amount.
- Currently Not Collectible status: If you cannot afford basic living expenses while paying your tax debt, the IRS may temporarily suspend certain collection activity.
You need to understand your options before assuming you have to accept the situation as it stands.
You May Have Other Options
So, what money can the IRS not take from your account? Certain types of income and property can receive legal protection. Along with that, the IRS has procedures for people facing financial hardship.
At DeVore Law, PLLC, we can help with your tax problems and help you understand your options when dealing with the IRS. You never want to ignore these issues because they will not go away on their own. The sooner you act, the better your options. Reach out today to schedule a consultation.
