Social Security

Can the IRS garnish disability payments?

When it comes to financial matters, it's important to stay informed about the potential implications on your income and assets. For individuals receiving disability payments, concerns about creditors and debt collection agencies may arise. One common question is whether the Internal Revenue Service (IRS) can garnish disability payments. In this article, we will explore this topic and shed light on the rules and regulations governing disability payments and IRS garnishments.

What is the IRS able to garnish?

For IRS garnishments, it's crucial to differentiate between different types of debts. The IRS has the authority to garnish wages, bank accounts, and other assets to collect unpaid federal taxes. However, there are certain limitations and protections in place, especially when it comes to disability payments.

Understanding Disability Payments

Disability payments are financial assistance provided to people who have a disability that prevents them from working. The amount of disability payments received depends on factors such as the severity of the disability, age, and work history. They can come from different sources, including:

  • Social Security Disability Insurance (SSDI)

  • Supplemental Security Income (SSI)

Can the IRS garnish SSDI?

In the case of SSDI, which is funded through the Social Security Administration (SSA), the IRS generally cannot garnish these benefits to collect federal taxes. According to federal law, SSDI benefits are considered "protected income" and are exempt from most forms of garnishment, including IRS levies. This protection ensures that individuals with disabilities can maintain a certain level of financial stability.

Can the IRS garnish SSI?

On the other hand, SSI payments are subject to different rules. SSI is a need-based program that provides financial assistance to disabled individuals with limited income and resources. Unlike SSDI, SSI payments can be garnished by the IRS to collect unpaid federal taxes. However, it's important to note that certain portions of SSI payments may be protected from garnishment, such as the portion used for basic living expenses.

Things to Consider

It's worth mentioning that while disability payments may be protected from IRS garnishments, they are not immune to other types of debt collection efforts. If you have outstanding debts, creditors may pursue legal action to collect what is owed. In such cases, disability payments could be at risk of being garnished by non-tax creditors, such as credit card companies or medical providers.

How to Protect Disability Payments from Non-Tax Creditors

To protect disability payments from non-tax creditors, individuals can take proactive measures:

Option 1: Ensure that disability funds are deposited into a separate bank account, clearly labeled as disability funds. Keeping these funds separate from other income can help establish their protected status and prevent commingling with other funds that may be subject to garnishment.

Option 2: Consider applying for a "protected status" designation for the disability funds. This designation can be obtained through a legal process and adds an extra layer of protection against garnishment. Consulting with a qualified attorney or legal professional can provide guidance on the specific steps and requirements for obtaining this designation.

In conclusion, disability payments are generally protected to a certain extent from IRS garnishments. SSDI benefits are typically exempt from IRS levies, while SSI payments may be subject to garnishment, but with limitations. It's important to stay informed about the specific rules and regulations that apply to your situation.

Taking proactive measures can help safeguard these crucial sources of income. Consulting with a legal professional or tax advisor is advisable if you have concerns or questions about IRS garnishments and disability payments. The application process for disability payments can be complex and lengthy, and it's important to have proper documentation and medical evidence to support the claim.