Generally, the government can garnish Social Security benefits described in Title II of the Social Security Act (OASDI). Section 6331 of the IRS code does not exempt Social Security from garnishment in order for the Internal Revenue Service to collect Federal taxes owed. The IRS may utilize the Federal Payment Levy Program or a manual levy. This includes Social Security disability program payments, retirement payments, and survivor payments.
Generally, your Social Security Benefits will be garnished by 15% monthly under the Automated Federal Payment Levy Program (FPLP). By its name, this is part of the automated process. On the other hand, through a manual levy, the IRS is only restricted in the sense that they must take into account what income is necessary for living and based on the family size. You need to contact Social Security to determine how the garnishment is being done.
Your options to stopping or releasing IRS social security garnishment depend largely on what your tax and financial situation look like. You should be proactive in resolving the situation as tax penalties and interest ccrue when you have back taxes or unpaid taxes.
If you cannot pay your tax bill, and you believe the bill is a mistake, contact the IRS. If you simply cannot pay, you still need to file and you may want to consider investment, retirement, or savings accounts you can use or utilize in some way (borrowing against 401k) to satisfy taxes owed. Getting a loan to pay it off or using a credit card is another option if you qualify, but you need to weigh the costs and interest of pursuing these options. As a basic requirement, you need to have all tax returns filed, a Collection Information Statement available (in most cases) to resolve your tax situation in considering the options below:
If you owe less than $25k in taxes, you can request an IRS Installment agreement, which is a payment plan that allows you to pay back the IRS over a number of years. Interest and penalties still continue to accrue, so the faster you pay down your taxes, the less penalties and interest you pay.
If you owe more than $10k in taxes, and you do not qualify for a regular IRS Installment Agreement, you may want to look at a Partial Payment Installment Agreement. You have to verify your financial situation with the IRS, but serves as a great alternative to an Offer in Compromise as it is easier to obtain. You must have no assets, or if you do have assets, they are not sufficient to resolve your tax problems. Interest and penalties accrue, but you may not pay them as the statue of collections makes part of your debt collectible.
If you do not qualify for an Installment Agreement or cannot resolve your tax problems through a PPIA, you may want to make an Offer In Compromise (OIC) which is an agreement with you and the IRS to pay less taxes than you owe. Whether your OIC is sufficient, depends on whether it is equal to or greater than your reasonable collection potential.
If your financial situation is dire, you could potentially be deemed by the IRS "Currently Not Collectible." You will have to verify that your financial situation is poor through a Collection Information Statement and that you do not have the assets or income to satisfy your current tax liabilities. The IRS has a set of standards it follows as to what expenses are necessary for you to live. Realize interest and penalties continue to accrue but the IRS will not try to levy you during this time.