Tax Debt for Retired Americans: 5 Common Questions

As the IRS-Hitman, I receive frequent e-mails requesting tax help. There are millions of Americans who are retired and living day-to-day on Social Security. While some have retirement funds or pensions that are helping them, most are barely living. An IRS debt is a serious problem for these Americans, and if you're one of them, it can seem like everyone has forgotten about you. The IRS-Hitman hasn't, and here is some advice to help you with an IRS debt.

Are there any tax deductions that I can get because I'm a senior citizen and on Social Security?
Absolutely. Here are two that you can get:

If I owe the IRS, can they levy or garnish my Social Security or any accounts I have, like my pension?
Unfortunately, yes the IRS can. They can actually garnish your Social Security check by up to 15%. Also, any accounts or investments you have are treated just as any other account by the IRS, which means they can seize them and withdraw the money, leaving you with little or nothing in an account it took you a lifetime to earn.

If I pass away and there's still an IRS debt, does my family still have to take care of it?
IRS debts work similar to regular debts you owe to creditors. At the time of your death, it is the responsibility of the executor of your estate to distribute the funds to both the IRS and your creditors. If you don't have an estate set up to handle your affairs at the time of your death, there isn't much the IRS can do to collect from your family.

However, if you Will anything to your family members (such as a house), if there are any back taxes on the property, they will have to be responsible for those since by taking the property, they assume any debts that come with it.

I'm on a fixed income and can't afford to pay anything on my IRS debt. Is there anything that I can do?
When you are truly destitute and you can only afford the most basic expenses, and you have no assets, there isn't much the IRS can do to collect from you because there simply isn't anything to collect. When you're in such a desperate state, you can be put into a Currently non Collectible status by the IRS. That means the IRS will suspend any collection activities against you, unless your financial situation improves.

Can the IRS take my Life Insurance Money?
Not while you're still alive. However, once you have passed away, that money will go to your estate, which will have to distribute it to the IRS, just as your estate executor would have to use the money to pay off other creditors.

Again, even though your family doesn't have to be responsible for your debt, you can still leave them with fallout from it. For example, if there's a lien on your property and you will it to your children, your children would have to pay off the debt to get the lien released so that they could sell the property.