When Your Social Security Benefits are Taken to Pay Back Money to the Federal Government

Last Updated On: 2/5/2018 6:48:01 PM

When Can the Federal government take my Social Security benefits to Pay Back Money to the Federal Government?

In some situations, the federal government is allowed to take social security benefits to repay debts owed to the federal government. But there are exceptions. This law does not apply to everyone. Not all benefits can be taken.

What types of Social Security benefits can be taken?

Social Security Retirement Benefits can be taken. Social Security Disability Insurance (SSDI) Benefits can be taken.  Supplemental Security Income (SSI) cannot be taken. SSI is specifically exempt from this law.

Can they take my entire monthly check?

No. There are two important limits:

• First step: the government can never take more than 15% of your regular check amount. But then there’s another limit that might reduce what is taken to less than 15%.

• Second step: The government must leave you least $750 per month (if you get that much in the first place). Even if this means the government has to take less than 15%. You must always have at least $750 per month after whatever the government takes for debt repayment.

How do the limits work?

Example 1: Suppose you receive a monthly Social Security payment of $850.

  • First, they cannot take more than 15% of $850. That would be $127.50.
  • If they took $127.50 from your $850 check, you would only have $722.50 left. That’s not enough, it’s lower than the guaranteed “floor” of at least $750 left. You. Therefore the most the government could take from the $850 regular check would be only $100.

Example 2: Suppose you receive $700 each month from Social Security.

  • 15% of $700 would be $105.
  • But your check is lower than $750. So the government cannot take anything. You are already below the minimum level, so the government could not take anything out of your check to repay a debt owed to the government.

Example 3: Suppose your regular monthly amount is $1,250.

  • 15% of $1,250 = $187.50. That’s the most they can take to repay a debt.
  • After subtracting $187.50, you would have $1,062.50 left. That’s more than the guaranteed “floor” of $750 per month. So the government would be permitted in this example to take the full 15% limit

Can a private creditor go after my benefits?

No. All Social Security and SSI benefits are protected from debt collection by private companies and creditors. Private creditors such as credit card companies cannot use this program.

Only federal agencies can use this program. Only debts owed to government agencies can be collected from Social Security or SSI benefits. This includes student loan debt, food stamp overpayments, and other money owed to the government.

The I.R.S. can also take Social Security benefits to collect tax debts. You should realize that the rules are different for tax debt collection. Some of the protections we describe don’t necessarily apply to tax debt collection by the government. If your Social Security or SSI benefits are being taken for back taxes, you should contact a tax professional for more information.

Is there anything I can do to fight back?

Yes. You are supposed to get a number of notices warning you that your benefits are going to be taken. These are called "notices of offset." Once you get one of these notices, you have the right to a hearing with the agency that is collecting the money.

For example, if you owe money on a student loan, your hearing will be with the Department of Education. You have the right to challenge the amount of money taken (called the “offset”), including the right to request a reduction of the amount to be offset. You also have the right to set up a repayment plan to avoid having larger portions of your benefits taken.

After you get notices from the agency that is collecting the money, you will receive a notice from the Department of the Treasury Financial Management Service. This is the agency that will actually take the money out of your benefits. Their number is (800) 304-3107.

Are there different rules for student loans?

Yes, you may have other rights when dealing with student loan debt. May may be able to cancel your student loan debt, or sign up for an affordable payment plan. You should get legal help to find out more about these options.

You can also learn a lot by looking at the U.S. Department of Education web site or by calling the Department’s Student Aid Office at 1-800-4FED- AID.

In addition, there is a Federal Student Aid Ombudsman Group of the U.S. Department of Education that will help you once you have tried other options. The toll-free phone number is 877-557-2575.

This article is based on information from the National Consumer Law Center. It was reviewed and updated by Legal Aid of West Virginia in 2015.

This is general legal information. For guidance about your situation, talk to a lawyer.