Social Security NOT exempt from IRS levy

IRS can levy both RSDI (OASDI) and SSI payments

Title 42 USC section 407 looks like it would exempt RSDI/OASDI (old-age, survivor, disability) payments received from Social Security, but it doesn’t. Section 407 is superseded by Title 26 section 6334(c). In addition, SSI (Supplemental Security Income) payments appear to be granted an immutable exemption from levy by 26 USC 6334(a)(11), but that appearance is dissolved to the extent of power to levy up to 15% SSI under the provisions of 6331(h)(1) and 6334(f). Furthermore, though IRS policy published at IRM 5.11.6.1.1 announces that IRS won’t levy on SSI payments, such payments are being levied to the allowable 15% these days.

42 USC 407(a) provides: “The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.”

42 USC 407(b) provides: “No other provision of law, enacted before, on, or after April 20, 1983, may be construed to limit, supersede, or otherwise modify the provisions of this section except to the extent that it does so by express reference to this section.”

Courts have agreed that 26 USC 6334(c) supersedes 42 USC 407 by providing: “Notwithstanding any other law of the United States (including section 207 of the Social Security Act), no property or rights to property shall be exempt from levy other than the property specifically made exempt by subsection (a).” Section 207 of the Social Security Act is at 42 USC 407.

26 USC 6334(a)(11) seems to, but does not, provide an immutable protection for Supplemental Security Income (SSI) by exempting: “Any amount payable to an individual as a recipient of public assistance under (A) title IV or title XVI (relating to supplemental security income for the aged, blind, and disabled) of the Social Security Act* (see below at *) . . .” Instead, 26 USC 6334(f) [see below at **] and 6331(h) operate together to allow a levy on SSI payments despite the appearance of 6334(a)(11). 26 USC 6331(h) “overrides” 6334(a)(11), by providing: “(1) In general: If the Secretary approves a levy under this subsection, the effect of such levy on specified payments to or received by a taxpayer shall be continuous from the date such levy is first made until such levy is released. Notwithstanding section 6334, such continuous levy shall attach to up to 15 percent of any specified payment due to the taxpayer. (2) Specified payment** (see below at **): For the purposes of paragraph (1), the term “specified payment” means (A) any Federal payment other than a payment for which eligibility is based on the income or assets (or both) of a payee, (B) any payment described in paragraph (4), (7), (9), or (11) of section 6334(a), and (C) any annuity or pension payment under the Railroad Retirement Act or benefit under the Railroad Unemployment Insurance Act.”

The Internal Revenue Manual at 5.11.6.1.1 confirms that IRS concludes SSI is not exempt from levy. IRS views 6331(h) as authorizing a levy on SSI up to 15% of the payments. The IRM states that the it is the policy of the IRS not to levy on SSI. However, many practitioners across the country report that IRS does in fact levy SSI payments to the extent of 15%. It seems odd that the IRM would express a policy against levy on SSI payments while the practice is to exact such a levy. Has a different policy been determined? Is that policy-change published in any announcement? I do not know. IRS levies on SSI payments remain an apparent departure from the published policy of IRM 5.11.6.1.1.

* As referred to in 6334(a)(11), title IV of the Social Security Act is located at Subchapter IV of 42 USC (generally, sections 601 et seq, Temporary Assistance for Needy Families, Child Welfare). Title XVI of the Act is located at Subchapter XVI of 42 USC (generally, sections 1381 et seq, Supplemental Security Income for Aged, Blind and Disabled).

** Concerning 6331(h)(2)(B) above, the apparent exemption was in part stripped by the Taxpayer Relief Act of 1997 which added 6334(f) to the IRC. Section 6334(f) expressly excludes SSI described in 633(h)(2)(B) from exemption if the Secretary approves a levy on SSI under 6331(h) – permitting a levy up to 15%. At paragraph 5124 of the Committee Reports congress reasoned that since such payments are in essence wage-replacement payments. Since wages are subject to levy Congress determined wage-replacement payments should also be subject to levy.

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