From IRS Publication 4418

The Federal Payment Levy Program levies on federal payments made to taxpayers who owe Federal taxes. Under the program, the IRS may take up to 15 percent of Federal payments made to you and apply them against your Federal tax debt. Other levy programs may withhold additional monies from your payments. This levy continues until the entire amount of your Federal tax debt is repaid or other payment arrangements are made.

The types of payments that may be levied include:

       Social Security benefits,

       Federal employee salaries or retirement annuities, and

       Federal and military vendor payments and travel payments.

The types of Social Security payments that may not be levied include:

       Children’s benefits,

       Supplemental Security Income payments,

       Lump Sum Death benefits,

       Prouty benefits (special benefits for people who were age 72 and over by 1971), and

       Benefits undergoing partial withholding to repay a debt to Social Security.

T he Federal Payment Levy Program affects taxpayers who have an outstanding tax liability. If you currently owe Federal taxes and you receive payments such as Social Security, you may be affected.

All taxpayers with outstanding tax debts are subject to the Federal Payment Levy Program. If you are subject to the levy, you will receive a notice from the IRS . You will then have 30 days to respond. Once your payments are levied, you will receive a notice indicating the amount of the deduction.

If you have an outstanding tax liability and you believe you will be affected, you can take steps now to prevent having your payments levied.

The first step is to determine if you owe the tax. Some possibilities for relief from your Federal tax debt include:

     Innocent Spouse Relief (see Publication 971, Innocent Spouse Relief), or

      You may not have responded to an earlier IRS notice and the IRS may have assessed the liability based on certain assumptions. You may be able to ask the IRS to reconsider the assessment (see Publication 3598, What You Should Know About the Audit Reconsideration Process).

The next step is to determine if you are able to pay all or part of the tax. If you are unable to pay your liability in full, you may want to consider one of the following alternatives:

     Enter into a monthly installment agreement,

     Enter into an Offer in Compromise, or

     You may ask to be classified as currently not collectible. Being currently not collectible does not mean the debt goes away. It means that the IRS has

determined you cannot afford to pay the debt at this time. Penalties and interest will continue to be added to the debt.

For more information on these alternatives, refer to Publication 594, The IRS Colection Process.

If you are a guardian or conservator, you will need a Power of Attorney before the IRS can talk to you about tax problems and make any payment arrangements. A Power of Attorney can be obtained by completing Form 2848, Power of Attorney and Declaration of Representative. If the taxpayer is incapacitated, you may still complete a Form 2848, however you will need to attach the legal documentation that allows you to act on the taxpayer’s behalf.

Further, the taxpayer may be entitled to an equitable tolling of the statute of limitations for any period of the taxpayer’s life during which it was medically determined that taxpayer was unable to handle their own affairs and there was no one authorized to act on the taxpayer’s behalf.