Retirees and Tax Debt: Social Security Garnishment and Realistic Relief Options

Updated for 2026

If you are retired, living on Social Security, and you owe back taxes, you are facing a uniquely difficult situation in 2026. Unlike a working-age taxpayer who can renegotiate a budget, pick up extra hours, or tap a growing 401(k), your income is largely fixed. It arrives on a schedule, in a predictable amount, and there is rarely a lever you can pull to increase it.

The IRS knows this. Federal tax law gives the IRS significant power to collect from retirees, including the authority to garnish Social Security retirement benefits. The same fixed-income reality that makes your situation stressful is also the reason two of the IRS’s most powerful relief programs, Currently Not Collectible (CNC) status and the Offer in Compromise (OIC), are available to you.

This guide explains exactly how much of your Social Security the IRS can take in 2026, how other retirement income streams are treated, why your fixed-income status changes the math on relief options, and how to protect enough of your income to live on.

Can the IRS Garnish Social Security? The Short Answer Is Yes

The IRS can, and does, garnish Social Security retirement benefits for unpaid federal tax debt. It does so through a program called the Federal Payment Levy Program (FPLP), which is authorized under Section 6331(h) of the Internal Revenue Code, as established by the Taxpayer Relief Act of 1997.

The FPLP is fully automated. It works by electronically matching the IRS’s database of delinquent taxpayers against federal payment records held by the U.S. Treasury’s Bureau of Fiscal Service (BFS). When a match is found, the levy is transmitted to BFS and a continuous deduction begins, without any additional notice or a court order being required.

How Much Can the IRS Take from Social Security?

Under the FPLP, the IRS can levy up to 15% of your monthly Social Security benefit. This cap is set by law and confirmed by the IRS’s own guidance on Social Security levies.

It does not matter how small or large your benefit is, the 15% maximum applies regardless of the dollar amount you receive.

To put this in concrete terms: The Social Security Administration reported that the average monthly retirement benefit was $2,071 in January 2026, according to SSA data. At 15%, the IRS levy on that average benefit would be approximately $311 per month (every month, continuously, until the tax debt is resolved or you take action to stop it).

Which Social Security Benefits Can Be Levied and Which Are Protected

Not all Social Security payments are treated equally under the FPLP. Here is a breakdown of what the IRS can and cannot touch:

Benefits Subject to FPLP Levy

• Title II Social Security retirement benefits (Old-Age benefits)
• Survivors benefits paid to an adult beneficiary

Benefits Exempt from FPLP (Fully Protected)

• Supplemental Security Income (SSI) is fully protected under all circumstances. The IRS is prohibited from levying needs-based benefits, and this is confirmed directly by the IRS’s FPLP guidance page.
• Lump-sum death benefits
• Benefits paid to minor children
• Benefits paid with partial withholding already in place for a debt owed to Social Security itself

What Happened to SSDI Levies?

As of October 5, 2015, the IRS stopped including Social Security Disability Insurance (SSDI) benefits in the automated FPLP. The IRS announced it would no longer levy SSDI through that program.

However, SSDI can still be levied manually by a revenue officer in certain circumstances. SSDI recipients who owe back taxes are not completely protected.

The Low Income Filter: A Critical Protection Many Retirees Qualify For

One important FPLP safeguard that often goes unmentioned: since 2011, the IRS has applied a Low Income Filter (LIF) to Social Security levies.

According to the National Taxpayer Advocate’s analysis of FPLP operations, the IRS generally excludes taxpayers whose income falls at or below 250% of the federal poverty level from the automated FPLP levy on Social Security and Railroad Retirement Board benefits.

In practice, this means that many retirees living primarily on Social Security, especially those with little or no other income, may be automatically screened out of the FPLP.

Instead, their cases are routed to normal IRS collection procedures, where there is greater opportunity for human review and hardship consideration.

Important caveat: The Low Income Filter is not a guarantee. The IRS Internal Revenue Manual describes several circumstances that can cause a taxpayer’s account to bypass the LIF even when income is low, including an indicator of unfiled delinquent returns on the account.

This is one reason why staying current on tax filing is critically important, even when you cannot afford to pay.

Other Retirement Income: Pensions, 401(k)s, and IRAs

Social Security is not the only income stream the IRS can reach. If you also receive income from a pension, traditional IRA, or 401(k), or if you still have money in those accounts, the IRS can levy those too. Understanding the rules for each is essential for any retiree trying to protect what they have.

Pension Income: Continuous Levy Without a Cap (Beyond Living Expenses)

Unlike Social Security, where the FPLP caps levies at 15%, pension income payments are subject to the general wage levy rules. According to Wiztax’s guide on IRS pension garnishment, the IRS can garnish pension payments in amounts that leave you with only enough to cover basic living expenses, which are calculated using IRS Collection Financial Standards.

Federal civil service retirement annuities are also subject to FPLP at 15%. Military retirement pay has been in the FPLP since 2017.

Railroad Retirement Board benefits (the Social Security equivalent for railroad workers) can also be levied at 15% through the FPLP.

Retirement Account Balances (401(k), IRA, SEP-IRA)

The IRS has authority to levy balances sitting in retirement accounts, including 401(k) plans, traditional IRAs, Roth IRAs, SEP-IRAs, and pension plans.

However, there is an important policy protection that applies here: the IRS generally will not levy a retirement account balance unless it determines that the taxpayer has engaged in “flagrant conduct.”

The IRS Internal Revenue Manual defines flagrant conduct to include behaviors such as willful tax evasion, fraud penalties, and deliberately failing to address growing tax debts while continuing to make voluntary retirement contributions.

Simply owing taxes because of a financial hardship or an unexpected liability does not automatically qualify as flagrant conduct.

In practice, a revenue officer who is considering levying a retirement account is also required to consider whether the taxpayer relies on those funds (or will rely on them in the near future) for necessary living expenses.

For a retiree who is already drawing down a modest account to cover bills, this consideration can be significant.

Critical warning: If a levy is placed on a retirement account balance, the forced withdrawal is treated as a taxable distribution. For accounts like traditional 401(k)s and traditional IRAs, this increases your taxable income for the year and can trigger taxes on the distributed amount. This adds a new tax liability on top of the old one. Get help before this happens.

How the IRS Views Retirement Savings in Offers and Hardship Cases

Even when the IRS is not actively levying a retirement account balance, that balance still matters for relief program eligibility. When calculating your Reasonable Collection Potential (RCP) for an Offer in Compromise, or when evaluating your assets for CNC status, the IRS will count retirement account balances as assets. Specifically:

• Cash and bank accounts: valued at 100%
• Most other assets, including real estate: valued at 80% of fair market value (quick-sale value)
• Retirement accounts: generally valued at 80% of the account balance for RCP purposes, per standard IRS financial analysis guidelines

For a retiree with a modest retirement account that is already the primary source of income, and shrinking, this valuation can complicate relief applications.

Working with a tax professional who understands how to document the reliance on those funds for necessary living expenses can be the difference between an accepted and rejected application.

The Notice Process: What Happens Before the IRS Starts Taking Money

The IRS cannot begin levying your Social Security without following a required notice sequence. Understanding this process gives you a window to act, and the sooner you act, the more options you have.

The Required Notice Sequence for Social Security Levies

1. Initial balance due notices (CP-14 and subsequent reminders): The IRS sends these first, requesting payment.
2. Final Notice of Intent to Levy / Notice of Your Right to a Hearing (CP 90 or LT11 / Letter 1058): This is the critical notice. It must be issued before any levy can begin. Upon receiving it, you have 30 days to request a Collection Due Process (CDP) hearing by filing Form 12153.
3. CP 91 or CP 298 (Final Notice Before Levy on Social Security Benefits): This notice is specific to Social Security. It informs you that your benefits may be levied within 30 days if no arrangements are made.
4. FPLP levy begins: After the required period expires without a resolution, the IRS transmits the levy electronically to the Bureau of Fiscal Service. The 15% deduction then begins with your next monthly payment.

One critical detail: Once you have received a Final Notice of Intent to Levy, even if it was years ago, the IRS is not required to issue another one before resuming or expanding levy activity. This is why it is dangerous to ignore these notices.

Your 30-Day Window: The Collection Due Process Hearing

If you request a CDP hearing within the 30-day window (using Form 12153), the levy cannot proceed while the appeal is pending.

At the hearing, you can propose an alternative collection arrangement, including an installment agreement, OIC, or CNC status, or in some cases, challenge whether the tax is correctly assessed.

Missing this 30-day deadline does not eliminate all appeal rights, but it significantly narrows them.

How Fixed Income Changes the Relief Calculus: CNC and OIC for Retirees

This is where your fixed income status stops being purely a problem and becomes a potential path to resolution. Both Currently Not Collectible status and the Offer in Compromise are grounded in the IRS’s assessment of what you can realistically pay.

When your income is fixed, modest, and fully committed to essential living expenses, the IRS’s own math often produces a result that favors you.

Currently Not Collectible (CNC) Status: Pausing All Collection for Hardship

Currently Not Collectible (CNC) status, sometimes called “hardship status” or “Status 53,” is an IRS designation that temporarily suspends all enforced collection activity, including FPLP Social Security levies, bank levies, and wage garnishments.

The authority for this designation comes from IRS Policy Statement 5-71. Full IRS guidance is available through the Taxpayer Advocate Service’s CNC page.

What CNC Status Does and Does Not Do

CNC status means the IRS will not take enforced collection action while the designation is in place. Specifically:

• All levies stop, including any active FPLP Social Security levy
• New bank levies, wage garnishments, and asset seizures are prohibited
• The IRS is required by law to send you annual balance due notices, but these are informational and not enforcement actions

What CNC does not do:

• It does not forgive or reduce the debt
• Interest and late-payment penalties continue to accrue during the CNC period
• The IRS may still file or maintain a Notice of Federal Tax Lien, which can affect your credit and ability to sell property
• Future tax refunds will still be applied to the outstanding balance
• If your tax debt exceeds $62,000, it may be certified to the State Department, which can restrict passport issuance or renewal. The IRS, however, has discretion to exclude CNC accounts from passport certification

CNC Qualification: The IRS Financial Analysis

To qualify for CNC status, you must demonstrate that your income, after subtracting IRS-allowable living expenses, leaves no meaningful disposable income available to make tax payments. The IRS reviews this using a Collection Information Statement, typically Form 433-F for individuals, or Form 433-A in more detailed cases.

The allowable living expenses are derived from IRS Collection Financial Standards, which were last updated April 21, 2025 and remain in effect through at least June 2026 (the IRS has indicated that the standards scheduled for a June 2026 update will be delayed). These standards cover:

• National Standards for Food, housekeeping supplies, clothing and personal care: Fixed monthly amounts based on household size, applied uniformly nationwide
• National Standard for Out-of-pocket health care: $84/month for those under 65; $149/month for those 65 or older (2025 standards)
• Local Standards for Housing and utilities: Vary by state and county based on U.S. Census Bureau data
• Local Standards for Transportation (ownership and operating costs): Vary by region; the 2025 national standard for vehicle ownership is $662/month for one vehicle

The IRS formula is straightforward: if your monthly income minus your allowable living expenses equals $0 or a negative number, you are a strong CNC candidate. For many retirees living on Social Security alone (where the 2026 average benefit of roughly $2,071 may not comfortably cover rent, utilities, food, and medical costs), this math naturally produces little or no disposable income.

The Special Case: Social Security as Your Only Income

According to IRS Collection procedures documented in tax resolution guidance, there is a simplified path to CNC status for taxpayers whose only income is Social Security or unemployment benefits.

In these cases, the IRS may grant CNC status without requiring a full Collection Information Statement. If your income consists entirely of Social Security and that income is already at or below the allowable expense levels, the case for CNC is especially strong.

The 250% federal poverty level filter that screens many Social Security recipients out of the automated FPLP levy also reflects this same underlying IRS recognition: many Social Security beneficiaries simply do not have the financial capacity to service tax debt while meeting basic needs.

The CSED Advantage: Why CNC Can Be a Path to Permanent Resolution

One of the most powerful aspects of CNC status for older retirees is its interaction with the Collection Statute Expiration Date (CSED). The IRS generally has 10 years from the date a tax is assessed to collect it.

Unlike some other resolution programs, a financial-hardship CNC designation does not pause or extend this 10-year clock.

This means that if you are placed in CNC status and your financial situation does not meaningfully improve before the CSED expires, the IRS’s legal authority to collect the remaining balance is extinguished, and the debt is effectively written off.

For a retiree in their late 70s or 80s with a modest tax debt from years past, this can be a significant factor in choosing a resolution strategy.

Offer in Compromise (OIC): Settling for Less Than You Owe

The Offer in Compromise program, described in detail by the IRS at IRS Topic 204, allows eligible taxpayers to settle their entire federal tax debt for less than the full amount owed.

The IRS will accept an OIC when it determines that the offer equals or exceeds the taxpayer’s Reasonable Collection Potential (RCP).

What Is Reasonable Collection Potential (RCP)?

RCP is the IRS’s calculation of how much it could realistically collect from you if it pursued all available collection tools. The formula has two components:

• Net Realizable Asset Value: The quick-sale value (generally 80% of fair market value) of your assets, minus secured debts. This includes home equity, bank balances, investment accounts, and retirement account balances.
• Future Income Component: Your monthly disposable income (income minus allowable expenses) multiplied by either 12 (for a lumpsum offer) or 24 (for a periodic payment offer).

For a retiree with limited disposable income and modest assets, both components of RCP can be very low, which is exactly the scenario where an OIC is most likely to succeed.

How the Fixed-Income Reality Benefits Retirees in OIC Calculations

A working-age taxpayer with stable employment may have a future income component of $500 – $1,000/month or more, which, multiplied by 12 or 24, produces a substantial RCP.

A retiree whose Social Security benefit of $2,071/month is fully consumed by rent, utilities, food, and medical costs has a future income component of essentially $0, making the RCP much lower and a small settlement offer potentially acceptable to the IRS.

OIC Application Requirements and Costs

To submit an OIC, you will need:

• Form 656: the offer itself
• Form 433-A (OIC): detailed financial disclosure
• A $205 application fee (as of 2025-2026): this fee is waived if you qualify for the low-income exception
• An initial payment: 20% of the offer amount for a lumpsum offer, or the first month’s proposed payment for a periodic offer (also waived for low-income filers)

The low-income exception for the application fee and initial payment applies if your household gross monthly income multiplied by 12 falls at or below 250% of the federal poverty guidelines.

Many Social Security-dependent retirees will qualify. Section 1 of Form 656 includes a Low-Income Certification checklist to help you determine eligibility.

During the time the IRS is reviewing your OIC, which can take six months to two years, collection activity is generally paused. This is another reason why submitting a well-prepared OIC can provide meaningful breathing room.

The Effective Tax Administration (ETA) Basis: A Path Even When RCP Is Higher

There is a third basis for an OIC, Effective Tax Administration (ETA), that may apply even when the IRS’s standard RCP calculation shows the tax is fully collectible.

An ETA offer can be accepted when collection in full would create an economic hardship, defined under federal regulations (26 CFR 301.6343-1(b)(4)) as a situation where the taxpayer is unable to pay reasonable basic living expenses.

For a retiree who owns a home with equity (raising their RCP above the tax owed) but who genuinely cannot afford both mortgage payments and tax payments on a fixed income, an ETA offer on economic hardship grounds may be the right argument.

This is a more complex and discretionary process that benefits from professional representation.

Budgeting to Preserve Enough to Live On

Whether you are applying for CNC status, negotiating an OIC, or setting up an installment agreement, the underlying document that drives every outcome is your financial disclosure: your income, your expenses, and what is left over. Getting this right matters enormously.

What the IRS Will Allow and What It Won’t

The IRS uses its Collection Financial Standards to determine which expenses are “allowable” when evaluating your financial statement. Some common expenses that retirees claim that the IRS may not allow include:

• Credit card minimum payments: Generally, not allowed. The IRS views this as unsecured debt that should wait behind federal taxes
• Private school tuition or education costs: Not considered necessary
• Voluntary 401(k) contributions during CNC status: The IRS may ask you to cease voluntary contributions while you owe taxes, though employer-required contributions as a condition of employment may be allowed
• Gym memberships, cable/streaming services above basic tiers: May be challenged as non-essential

Expenses the IRS will generally allow, and where retirees often have significant legitimate claims:

• Medicare premiums (Part B, Part D) and supplemental insurance (Medigap)
• Out-of-pocket prescription costs and co-pays beyond the $149/month standard for those 65+. If documented with receipts and prescription records, the IRS may allow actual costs above the standard
• Long-term care insurance premiums if medically necessary
• Required minimum distributions (RMDs). These are mandatory withdrawals that produce taxable income but are required by law. They factor into income but are not themselves discretionary spending
• Housing costs up to local standards: if your actual rent or mortgage (with property taxes and insurance) is at or below the IRS local standard for your county and household size, the full amount is allowed without question

The 2025-2026 Medical Expense Advantage for Seniors

The IRS Collection Financial Standards include an elevated national standard for out-of-pocket health care expenses for taxpayers 65 and older: $149 per month, compared to $84 for those under 65 (2025 standards, effective through at least June 2026). This higher standard is allowed without documentation.

But here is where many retirees leave money on the table: if your actual out-of-pocket medical costs (prescription drugs, dental, vision, hearing aids, specialist co-pays, durable medical equipment) exceed $149/month, you may be able to claim the actual amount if you can document it.

The IRS Internal Revenue Manual allows for deviations from standards when facts and circumstances show that the standards are inadequate to provide for basic living expenses. Chronic health conditions are a common basis for this deviation.

Protecting Your Benefits from Private Creditors: A Quick Note

While this article focuses on IRS levies, it is worth noting that private creditors (credit card companies, medical debt collectors, landlords) generally cannot garnish Social Security benefits.

The Social Security Act protects benefits from seizure by private creditors.

To protect your benefits from accidental seizure:

• Keep Social Security benefits in a dedicated bank account that receives no other deposits
• Inform your bank that the account holds Social Security funds. Banks are required to protect two months of Social Security deposits even from bank-issued levies
• Consider using a Direct Express card, which allows you to access benefits without a bank account

The protections above do not apply to the IRS, which can levy Social Security under federal law regardless of which account receives the deposits.

Other Relief Options to Know

Installment Agreement

If you have some ability to make monthly payments, even small ones, a formal installment agreement with the IRS will stop the FPLP levy immediately upon approval.

Once an installment agreement is in place, the IRS must release the Social Security levy. For retirees who can afford a modest payment after necessary expenses, an installment agreement can provide structure and certainty without requiring a large lumpsum.

Partial Payment Installment Agreement (PPIA)

A PPIA allows you to make monthly payments based on your actual disposable income, even if those payments will not fully pay the debt before the CSED expires. Like CNC, a PPIA allows the 10-year clock to continue running, and any remaining balance at expiration is generally written off.

Unlike a full installment agreement, a PPIA is structured around what you can afford rather than what you owe.

Innocent Spouse Relief

If you are a retiree facing a tax debt that arose primarily from your former or current spouse’s activity on a joint return (income they earned that you did not know about, deductions they claimed that were incorrect), you may qualify for Innocent Spouse Relief, Separation of Liability, or Equitable Relief under IRC Section 6015.

These programs can remove or reduce your personal liability for the joint tax debt.

The One Big Beautiful Bill Act: A New Senior Tax Deduction

Signed into law on July 4, 2025, the legislation commonly referred to as the One Big Beautiful Bill Act includes a temporary $6,000 additional deduction for eligible seniors (through 2028).

This senior deduction may reduce the adjusted gross income of some retirees below the threshold at which Social Security benefits become taxable, potentially reducing or eliminating a portion of the underlying tax liability. If you owe back taxes from recent years, reviewing your return with this new provision in mind may be worthwhile.

How Wiztax Helps Retirees Navigate Tax Debt on a Fixed Income

Navigating IRS collection procedures requires documenting your financial picture precisely: in the format the IRS expects, using the standards the IRS applies, and presenting the strongest case for the relief you qualify for.

For retirees on fixed incomes, the stakes are high. An incorrect or incomplete financial disclosure can result in a payment demand that exceeds what you can afford, or a missed opportunity for a settlement that would otherwise be available.

What Wiztax Does for Retirees Facing IRS Debt

Wiztax specializes in tax debt resolution and offers a free online evaluation at wiztax.com to help you understand which programs you may qualify for based on your specific situation. For retirees, this typically includes:

• Reviewing your full income picture (Social Security, pension, IRA distributions, and any other income) against the current IRS Collection Financial Standards to calculate your actual disposable income
• Preparing accurate Collection Information Statements (Form 433-F or 433-A) that properly document all allowable expenses, including medical costs that may exceed IRS standards
• Determining whether CNC status, an OIC, a partial payment installment agreement, or another resolution strategy best fits your situation and timeline
• Communicating directly with the IRS on your behalf to stop active levies while your case is being processed
• Submitting well-supported OIC applications that accurately reflect your RCP, helping to maximize the chance of acceptance on the first submission

Additional Resources for Retirees with Tax Debt

• IRS Publication 594, The IRS Collection Process: A plain-language overview of how the IRS collects taxes, including levy rules and appeal rights
• IRS FPLP information page: Official IRS guidance on Social Security benefits and the Federal Payment Levy Program
• IRS Offer in Compromise Booklet (Form 656-B): Step-by-step instructions and all forms for submitting an OIC
• Taxpayer Advocate Service — Currently Not Collectible guidance: Independent IRS oversight agency guidance on CNC hardship status
• IRS Collection Financial Standards (2025, effective through June 2026): The current allowable living expense amounts the IRS uses in all financial analysis
• Low Income Taxpayer Clinic (LITC) finder: If you cannot afford professional help, LITCs provide free or low-cost representation for taxpayers whose income is below a qualifying threshold

Key Takeaways: What Every Retiree Facing IRS Debt Needs to Know

• The IRS can garnish up to 15% of your Social Security retirement benefits through the Federal Payment Levy Program continuously, without a court order, once the required notice process is complete.
• SSI is fully protected and cannot be levied under any circumstance. Benefits paid to minor children and lump-sum death benefits are also exempt.
• The IRS applies a Low Income Filter to Social Security FPLP levies, generally excluding taxpayers whose income falls at or below 250% of the federal poverty level. Many low-income retirees qualify.
• Pension income, federal annuities, military retirement pay, and railroad retirement can also be levied. Retirement account balances can be seized but are subject to an IRS policy protection against levy unless flagrant conduct is found.
• For retirees whose Social Security and other fixed income fully covers (or barely covers) allowable living expenses, Currently Not Collectible status is often a realistic and appropriate outcome. CNC halts all collection, including FPLP levies, and does not pause the 10-year collection statute.
• An Offer in Compromise can settle your entire debt for less than you owe if your Reasonable Collection Potential is lower than your tax liability. This is a situation that naturally arises when income is fixed, modest, and fully committed to necessary expenses.
• You must file all required tax returns to qualify for any IRS relief program. Unfiled returns will also cause your account to bypass the Low Income Filter and make you immediately eligible for the FPLP levy.
• The 30-day window after receiving a Final Notice of Intent to Levy (or a CP 91/CP 298 for Social Security) is your most important opportunity to act and preserve your full benefit check.

Ready to explore your options? Start with Wiztax’s free online tax evaluation to find out which IRS relief programs you qualify for — at no cost and with no obligation.

Frequently Asked Questions

Can the IRS garnish Social Security if I am on a fixed income?

Yes. Being on a fixed income does not automatically exempt you from IRS Social Security garnishment. However, it does significantly improve your eligibility for hardship programs like CNC status and Offer in Compromise.

If your income barely covers necessary living expenses, the IRS may be legally and practically unable to collect in a meaningful way and documenting that reality is the key to relief.

How do I stop the IRS from garnishing my Social Security?

The fastest ways to stop an active FPLP Social Security levy are: (1) set up an installment agreement, which legally requires the IRS to release the levy; (2) obtain CNC hardship status; or (3) have an Offer in Compromise accepted or pending review.

You can also request a levy release based on economic hardship by calling the number on your IRS notice or the IRS collection line and providing documentation of your income and expenses.

What is the IRS low income filter for Social Security garnishment?

The Low Income Filter (LIF) is an IRS screening mechanism applied to the Federal Payment Levy Program. Taxpayers whose income falls at or below 250% of the federal poverty level are generally excluded from the automated FPLP Social Security levy and instead handled through normal collection procedures.

This filter was established after advocacy by the National Taxpayer Advocate and provides meaningful protection for low-income retirees, though it is not absolute. Accounts with unfiled return indicators can bypass the filter.

Will the IRS go after my 401(k) or IRA if I owe back taxes?

The IRS has the legal authority to levy retirement accounts, including 401(k)s, traditional IRAs, and pensions. However, as a matter of IRS policy, revenue officers are generally directed not to levy retirement account balances unless the taxpayer has engaged in “flagrant conduct” such as tax evasion or fraud.

The IRS also considers whether you rely on those funds for current or future living expenses. Acting before a levy is issued, through an installment agreement, CNC status, or OIC, is the best protection for your retirement savings.

What is the difference between CNC status and an Offer in Compromise for retirees?

CNC status is a temporary suspension of collection activity. The debt remains, interest and penalties keep accruing, and the IRS may review your situation annually. It is appropriate when your income is truly insufficient to make any payments and when waiting for the collection statute to expire is a viable strategy.

An Offer in Compromise permanently resolves the debt for a lump sum that reflects what you can realistically pay. The right choice depends on your age, the size of the debt, the remaining time on the collection statute, and your assets.

My spouse’s Social Security is not subject to my tax debt, right?

Generally correct. If the tax debt is yours alone (not a joint liability), the IRS cannot levy your spouse’s individual Social Security benefits. However, if you and your spouse filed joint returns and both are liable for the debt, both Social Security benefits may be subject to FPLP levy.

An important exception: in community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), income earned during marriage may be treated differently. Consulting a tax professional on the impact of community property rules is advisable.

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