• Menu
  • Skip to primary navigation
  • Skip to main content

Faithful with a Few

  • Start Here
  • Blog
  • About
  • Contact
  • Start Here
  • Blog
  • About
  • Contact

federal insurance contributions act tax

The Treasury Department’s New Regulation To Protect Social Security Benefits

By //  by Khaleef Crumbley

Recently, the United States Treasury Department put a new rule into place that seeks to protect those the garnishment of Social Security benefits. When you are collecting, and depending on, Social Security benefits, it can be extremely difficult to deal with debt collectors. To then have your bank garnish your Social Security benefits, can put you in a position where you have very few options.

According to an article on Market Watch:

Before the new rule, when debt collectors pursuing an unpaid debt secured a court-ordered garnishment, the bank often would simply freeze the money in the debtor’s account, whether or not it included federal payments, such as Social Security benefits, said Margot Saunders, an attorney with the National Consumer Law Center.

The easiest thing for a bank to do in this instance is to freeze the entire account, regardless of the source of the deposits. The problem with that type of response, is that it can leave the recipient – oftentimes an elderly person – with no way to pay for basic living expenses.

There are actually rules and exemptions in place, which govern when and how a debt collector can garnish Social Security benefits, but as Saunders points out, “It’s very, very difficult for an elderly person to step through the hoops that are required for exemptions… In the meantime, while they’re going through that process, they have no money.”

Having all of your money frozen at once can lead to financial disaster for someone in a social welfare program.

A New Rule For Banks Ordered To Garnish Social Security Benefits

In an effort to help beneficiaries avoid undue hardship, the Treasury Department will now require banks to verify whether the money in the accounts came from an automatic deposit of federal benefits (including Social Security). If so, the bank is required to leave two months’ worth of federal benefits in the account untouched, so that they can be used to cover living expenses.

However, if the benefits were deposited more than two months in the past, or if they were deposited by check (no matter how recent), then the bank is free to freeze the entire account. The recipient will then have to follow the normal procedure for claiming an exemption in their state.

You may not think that there are a lot of people who are affected by this, but the National Consumer Law Center says otherwise:

NCLC estimates that more than 1 million federal-payment recipients annually had their benefits garnished in a bank account. That estimate is based on “the number of complaints and concerns we get from lawyers around the country,” Saunders said. She said legal-aid lawyers cite such garnishment as among the most significant consumer problems, second only to mortgage-related issues.

This new rule will be a welcome relief to many who were already struggling to make ends meet, and pay off debt at the same time. Whether they be dealing with student loan repayments, credit card debt, or medical debt, they will now be given a little bit of breathing room while they consider their options.

Garnishment Of Your Social Security Benefits By The Government

Keep in mind that this new law only governs court orders directed at banks (after the benefits have been paid). It is still possible to have money withheld from your payments at the Federal level, before you receive a disbursement.

According to the Social Security Administration, here are a few common circumstances in which the Federal government can garnish Social Security benefits:

  • To enforce child support or alimony obligations under Section 459 of the Social Security Act;
  • Internal Revenue Service (IRS) can levy against benefits to collect unpaid Federal taxes according to Section 6334(c) of the Internal Revenue Code;
  • IRS can collect taxes due by levying up to 15 percent of a monthly benefit until the debt is paid;
  • IRS allows beneficiaries to have a portion of their check withheld to satisfy a current year Federal income tax liability according to Section 3402 (P) of the Internal Revenue Code;
  • Other Federal agencies can collect money from benefits to pay a non-tax debt owed to that agency according to the Debt Collection Act of 1996 (Public Law 104-134); and
  • Under the Mandatory Victim Restitution Act, certain civil penalties provide the right to garnish benefits under 18 USC 3613.

This list looks similar to the circumstances in which your tax refund can be garnished. This is why it is so important to take care of all debt before you retire, and never become a cosigner for a loan.

It is much easier to deal with these issues when you have a lot of options, instead of waiting until bankruptcy and debt are all that you have in front of you.

photo by DonkeyHotey

Filed Under: Debt Management, Retirement Tagged With: bank, benefits, civil procedure, collection agency, contract law, credit, debt, debt collectors, federal benefits, federal insurance contributions act tax, federal reserve system, finance, garnish, garnish social security, garnishing, garnishment, labor, law, protect, rule, social security, social security act, social security administration, social security benefits, the elderly, treasury department

Social Welfare Program Payments Account For Over One Third Of U.S. Wages!

By //  by Khaleef Crumbley

According to a recent article by CNBC, various government welfare payments account for more than a third of all salaries and wages across the entire population of the United States! That is an amazing statistic when you stop to think about it what a social welfare program really is.

Welfare Payments Gone Wild

Now, when I speak of welfare payments, I am not just referring to payments made to the poor. Social Security, Medicare, and another popular social welfare program – unemployment – are all included! Here is what the article had to say about the numbers:

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

So 35% of total wages and salaries will be nothing more than government handouts! The fact that this number was only 10% just a mere 40 years ago should alarm many!

What this means is that if you are in a room with 99 other people (say at a supermarket), 35 of them would completely rely on a social welfare program for their wages! There is no way that this nation can continue to function in this state for much longer!

“The U.S. economy has become alarmingly dependent on government stimulus,” said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients.

Instead of being a nation of people who worked as hard as we could in order to support ourselves, and making sacrifices whenever needed, we are now people who depend on the government to support us, without any real effort on our part! I would say that we are not just dependent on government support, but we actually feel entitled to it.

Now, obviously Social Security is different because most of the people who are collecting benefits are retired and are receiving income based on contributions they made while working. The system is set up so that current workers support those who are retired, so this assessment doesn’t really apply to them.

A Social Welfare Program In Trouble

Even though I stated that Social Security should be seen in a different light than the other welfare payments, the thought of it should immediately bring to mind all of the baby boomers that plan to retire within the next decade or so!

Many people are simply not prepared for retirement, which means that they will depend even more heavily on Social Security to support even the most basic needs. Whether you are a baby boomer or not, take a look at the current IRA contribution limits and 401k contribution limits, and prepare yourself for retirement!

One of the proposed ways to fix this problem has been to reduce either Social Security or Medicare…or both! Unfortunately, most people are blindly hoping for another way…

A Wall Street Journal/NBC News poll released last week showed that  less than a quarter of Americans supported making cuts to Social Security or Medicare in order to reign in the mounting budget deficit.

Those poll numbers may be skewed by a demographic shift the likes of which the nation has never seen. Only this year has the first round of baby boomers begun collecting Medicare benefits—and here comes 78 million more.

So, we are already at 35% of the population receiving welfare payments, and now we are expecting about 78 million more retired baby boomers!?!? I honestly don’t know if there is anything that can be done to turn this around – unless we make some major changes to how our economy functions!

Most people are aware of the fact that we won’t collect enough in Social Security taxes to cover outgoing benefits in the future (and the current payroll tax holiday sure isn’t helping)! Here is how the article summarizes our current crisis:

Social welfare benefits have increased by $514 billion over the last two years, according to TrimTabs figures, in part because of measures implemented to fight the financial crisis. Government spending normally takes on a larger part of the spending pie during economic calamities but how can the country change this make-up with the root of the crisis (housing) still on shaky ground, benchmark interest rates already cut to zero, and a demographic shift that calls for an increase in subsidies?

That’s the key question! Not only will we have a huge surge in the amount of retirees looking for government benefits, but because of the tremendously weak (and it will weaken more in the future) housing market, high unemployment and underemployment, and increasing public healthcare costs, we will surely face an unprecedented amount of citizens looking for complete government support!

Unfortunately, most politicians are only interested in the short term, so the future looks pretty bleak! What’s even worse is that many of the developed nations are facing the same problem! Here is another quote from the article:

At the very least, we can take solace in the fact that we’re not quite at the state welfare levels of Europe. In the U.K., social welfare benefits make up 44 percent of wages and salaries, according to TrimTabs’ Schnapp.

“No matter how bad the situation is in the US, we stand far better on these issues (debt, demographics, entrepreneurship) than other countries,” said Steve Cortes of Veracruz Research. “On a relative basis, America remains the world leader and, as such, will also remain the world’s reserve currency.”

If we existed in a vacuum, then maybe we could feel good about our nightmare not being as scary as others. However, since many of the world economies are so connected, this means trouble for the entire world population! So while we are focusing only on ourselves – thinking about various credit card benefits, finding a cosigner for our loans, and identity theft – the economy could very well be crumbling before our eyes.

photo by renjith krishnan

Join The Discussion:

  1. Are you shocked that 35% of all wages are based on payments from a social welfare program?

  2. Do you think that there should be a limit to these welfare payments?

  3. Do you find comfort in the fact that other nations are doing worse?

  4. How do you think we can return to being a nation full of people who support themselves?

To Stay up to day with the latest Economic, Tax, and Personal Finance developments, sign up for our RSS Feed, or Email Updates:

Filed Under: Economics Tagged With: federal insurance contributions act tax, goldberg v. kelly, government, government welfare, labor, medicare, payments, personal responsibility, politics, social issues, social security, social security debate, social security tax, social welfare, social welfare program, socioeconomics, the economy, unemployment, wages, welfare, welfare economics, welfare payments, welfare state

Copyright © 2022 · Mai Lifestyle Pro On Genesis Framework · WordPress · Log in