Several Americans get Social Security payments every month, yet some individuals find themselves in a position where garnishing their income may be essential.
Having your hourly salary confiscated to pay for these expenses is one thing, but many people question whether benefits may also be garnished. Benefits are treated in the same way as income, and the answer is that they may be garnished as well.
Garnishment of Social Security benefits
Your benefits may be garnished if you owe child support, fines, or alimony, among other debts. The state governs the laws governing garnishment. The Social Security Administration does not make retroactive changes to beneficiaries’ benefits.
Back taxes and Social Security garnishment
Your benefits may be withdrawn to pay off past-due federal tax arrears. The Department of the Treasury is in charge of this process. You will not be able to challenge this decision.
I need assistance from the SSA; how do I get it?
If you have a problem with it, you’ll need to contact the IRS to learn more about your options for appealing the decision.
Your benefits may be garnished if you owe money to any other government agency, according to the Debt Collection Improvement Act of 1996. The Department of the Treasury will be in touch with you about the situation.
The Social Security Administration has no control over this, and you may contact them to learn more about your situation.
Can My Retirement payment and Social Security Be Garnished?
Is it possible to garnish Social Security benefits? In certain cases, the answer is a definite no; yet, it becomes a viable option to consider in others. In the end, it all comes down to who is doing the garnishing.
- The Treasury Department may garnish your Social Security payments if you have outstanding obligations such as back taxes, child or spousal support, and a federal student loan in arrears with the federal government.
- If you owe money to the Internal Revenue Service, a court order is unnecessary to have your benefits garnished.
- You’ll be required to pay back taxes in the amount of 15 percent of your Social Security benefits, as well as up to 65 percent of your Social Security benefits for maintenance or child support owed.
What Is Wage Garnishment and How Does It Operate?
Here’s how the garnishing procedure works. A business creditor to whom you owe money drags you to court and obtains a judgment against you due to your actions.
The creditor then petitions the court for an order authorizing the garnishment of your earnings, bank account, and any other assets you may have to settle the debt.
The court approves the garnishment to settle the debt. Is it possible that all of your assets, including Social Security and retirement packages such as a 401(k) or an individualized retirement account (IRA), would be compromised?
When the Creditor Is a Commercial Entity
Specifically, when it comes to federal assistance payments, the answer is “no.” The benefits we’re talking about include Social Security and Veterans Affairs benefits, railroad retirement benefits, and Office of Personnel Management retirement benefits—especially if the creditor has provided you a credit card or a vehicle loan and you’ve fallen behind on your payments on time.
In addition, creditors who hold medical debts and personal and payday loans are barred from topping up these benefits. According to Section 207 of the SSA, this is the case. It is required by law.
The ERISA of 1974 protects 401(k) accounts and individual retirement accounts (IRAs). The former is generally protected from garnishment by commercial creditors as long as the money remains in the account.
With the latter, the first million dollars in your IRA is protected under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. (BAPCPA).
The bank must analyze your account history (or accounts) for the two months before the date on which the garnishment order was issued if you are not required to pay back taxes or child support obligations.
During those two months, known as the “look-back period,” if your Social Security or other protected payments have been directly deposited into your accounts, the bank is required to preserve your money up to the entire amount of the direct deposits. You have complete discretion over how you spend it. 45
In contrast, if you’re still employed, your creditor may be entitled to garnish your earnings and, depending on the state in which you reside, any other permissible assets you may have, such as a home or vehicle, in addition to your salary.
When the Creditor Is the Federal Government
Consider the scenario in which you owe unpaid taxes to the federal government. The Treasury Department, on the other hand, is very another kettle of fish.
You’ll have to give up 15 percent of your Social Security benefits to qualify. 6 Funds held in a 401(K) or an IRA are similarly susceptible to theft.
Even if you are in default on your alimony or child support obligations, the federal government may intervene: You might be forced to give up as much as 50 percent to 65 percent of your Social Security benefits.
Furthermore, the Internal Revenue Service (IRS) does not need a court order to garnish your benefits; it has the authority to do so on its initiative. 8
You have two business days from the time you get the garnishment order to evaluate and identify the accounts that are being garnished. Banks may block accounts if the order seeks to collect federal taxes or child support, regardless of whether the funds come from Social Security or another source.
If you work out a payment plan with the Internal Revenue Service, you may prevent garnishment. The government will no longer garnish your Social Security payments if you meet your obligations, while it reserves the power to do so in the future if you do not.
When the Credit Is a National Student Loan
If you are in default on a federal student loan, the government may be able to seize up to 15 percent of your outstanding balance.
However, it is not entitled to the first $750 of your monthly Social Security and retirement income or any other benefits.
For example, if you get $850 in benefits, 15 percent of that amount is $127.50 in cash. Given that you cannot be given anything less than $750, the maximum amount of money that may be taken from you is $100. This restriction only applies to federal student loans; it does not apply to private student loans.
The national govt is the only entity that has the authority to garnish your Social Security and other government retirement income. Get legal assistance if you are at risk of facing such a situation. The American Bar Association offers connections to professionals who can help you with free or low-cost legal advice.