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13.4.2.1 IRS Debts

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  6. 13.4.2.1 IRS Debts

13.4.2.1 IRS Debts

The Internal Revenue Service (IRS) collects federal income taxes subject to wage and property exemptions provided in the Internal Revenue Code.205 It provides exemptions for income that may be more generous for families and less generous for individuals206 than the federal wage garnishment protections in the Consumer Credit Protection Act (CCPA).207 It exempts other income, such as unemployment benefits, workers’ compensation, and income to fulfill a child support obligation, from IRS seizure.208 Wearing apparel, a family’s personal effects and furniture, tools of the trade, and certain other personal property are also exempt.209 The taxpayer’s principal residence is exempt from levy unless a United States district court judge or magistrate approves the levy.210

The statute authorizing tax levies specifically refers to Social Security benefits, so the anti-alienation provision of the Social Security Act does not bar the IRS from taking Social Security benefits.211 However, the statute also limits any levy to 15% of the monthly payment.212 The statute’s list of exemptions available against tax levies is exclusive, and no other exemptions apply.213

Footnotes

  • 205 26 U.S.C. § 6334. See also §§ 10.2.1.3 (inapplicability of federal Claims Collection Act to IRS debts), 10.2.13.10 (remedies for debt collection abuses by IRS), 10.3.1 (applicability of Federal Debt Collection Procedures Act to IRS debts), supra.

  • 206 26 U.S.C. § 6334(d) provides for weekly exemption of the standard deduction provided by 26 U.S.C. § 63(c) and the deduction provided for personal exemptions in 26 U.S.C. § 151 divided by fifty-two.

  • 207 15 U.S.C. § 1673(b)(1)(C) (making CCPA limits inapplicable to garnishment for tax debts). See United States v. Clayton, 613 F.3d 592 (5th Cir. 2010) (retirement-type benefits can be garnished for restitution order for unpaid taxes; CCPA makes 25% limit inapplicable to tax debts). See generally § 14.2, infra.

  • 208 26 U.S.C. § 6334(a).

  • 209 Id.

  • 210 26 U.S.C. § 6334(a)(13), (e). Cf. Sills v. Dep’t of Treasury (In re Sills), 82 F.3d 111 (5th Cir. 1996) (distinguishing tax lien, which is merely a security interest, from a levy, which operates as a seizure; tax lien can be placed on home even if home is exempt from levy).

  • 211 26 U.S.C. § 6334. See Blanchette v. Social Sec. Admin., 2014 WL 667514 (D. Mass. Feb. 21, 2014) (pro se).

  • 212 26 U.S.C. § 6331(h).

  • 213 26 U.S.C. § 6334(c). See, e.g., United States v. Craft, 535 U.S. 274, 122 S. Ct. 1414, 152 L. Ed. 2d 437 (2002) (tax lien can attach to debtor husband’s interest despite Michigan’s recognition of tenancy by entireties); United States v. Offiler, 336 Fed. Appx. 907 (11th Cir. 2009) (Florida homestead exemption will not protect property against foreclosure of federal tax lien); United States v. Sawaf, 74 F.3d 119 (6th Cir. 1996) (ERISA’s anti-alienation provision does not bar garnishment of taxpayer’s interest in an ERISA pension fund for unpaid taxes); United States v. Berk, 374 B.R. 385 (D. Mass. 2007) (state homestead exemption does not protect against federal tax lien); United States v. Hanson, 2005 WL 3116099 (D. Minn. Apr. 21, 2005) (Minnesota homestead exemption does not protect non-debtor wife against sale of homestead for husband’s individual tax liability); In re Jones, 206 B.R. 614 (Bankr. D. Colo. 1997) (broad anti-alienation provision of federal statute governing thrift savings plans does not protect against federal tax lien and levy). See also In re Szwyd, 408 B.R. 547 (D. Mass. 2009) (IRS can reach homestead property, other creditors cannot; equities favor ordering IRS to take homestead and leave non-exempt property for other creditors when tax debt is large, non-exempt property is small, and debtor’s conduct was reprehensible); Brown v. Ford Motor Co., 797 N.E.2d 546 (Ohio Ct. App. 2003) (state garnishment law does not apply to IRS garnishment, and employer who complies is immune from any liability to employee).