The IRS is typically prohibited from levying on veterans benefits in most circumstances. This provision is designed to protect veterans from IRS enforced collection action. But what if those benefits were deposited into the veteran’s bank account? Does this change the nature of the money and allow the IRS to levy on those funds? The answer is YES.
In a recent case, the Court agreed that the IRS is prohibited from levying on veterans benefits to the extent that those benefits are “payable to the” veteran. This means that the IRS is prohibited from levying on the federal government for veterans benefits that have not yet been paid to the veteran. However, in this case, the veteran received his veteran’s benefits from the government and deposited them into his bank account.
The IRS subsequently levied on the bank account and took the veteran’s money. The veteran sued, contending that the IRS was prohibited from taking this action because the money in the bank account was his veterans benefits. The court stated that there is a distinction between benefits that are “payable to” the taxpayer versus the benefits that are “received by” the taxpayer.
Because the veteran had put his benefits into his bank account, and because these benefits had already been “received by” him, they are not entitled to statutory protection ordinarily afforded to veterans and their benefits. Are you a veteran and do you owe money to the IRS? Call us, we can help.