Can the IRS Garnish Disability or Unemployment Wages?
Falling behind on your federal income taxes is serious business. If you don't set up and maintain a federal payment plan, the IRS will eventually attempt to collect your overdue taxes by garnishing a portion of your income. Work income, Social Security income and disability can be garnished by the IRS. Unemployment income is protected from an IRS garnishment.
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Wage Garnishment
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The IRS can garnish up to 25 percent of your disposable work income. The IRS considers your disposable income your income after taxes. You receive 20 days notice before any wage garnishment; you can call the IRS once you've received your notice to attempt to set up a payment plan and avoid the garnishment. Your employer can't fire you for a single wage garnishment. If there are multiple wage garnishments, such as an additional garnishment from a creditor who's won a judgment, your employment is no longer protected.
SSDI
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Social Security Disability Income (SSDI) is a monthly benefit paid to those who qualify. Qualifying for disability is based on how much you've paid into Social Security and whether you meet the definition of disability. The IRS can garnish up to 15 percent of your SSDI benefit. When the IRS is planning to garnish your SSDI, you will receive a notice of intent to levy. You have 30 days from the date of the letter to make arrangements to pay your debt. If you don't make arrangements, the garnishment will start. Veteran's disability benefits fall under the same guidelines as SSDI.
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SSI
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Another type of disability benefit, Supplemental Security Income (SSI), is protected from IRA garnishments. SSI is based on financial need as well as disability. SSI can't be garnished by the IRS or any other creditors.
Unemployment
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If you're unemployed through no fault of your own, you may be eligible for unemployment benefits. You file for unemployment benefits with the state where you worked. Unemployment benefits are protected from an IRS garnishment. Once you begin a new job, however, the garnishment can, and likely will, begin. The IRS is nothing if not persistent. You may be able to avoid garnishment by contacting the IRS and setting up a payment plan. If you're experiencing a financial hardship, the IRS will take that into account if you can prove it with financial statements.
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