The US government can garnish your entire paycheck if it decides you've been overpaid for benefits.

Receiving excess Social Security payments can lead to big problems. On March 7, the Social Security Administration (SSA) said it was reinstating a rule that it could withhold 100% of a recipient's monthly payment to recover overpayments. Previously, it had withheld only 10%, according to CBS News.

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Under the Biden administration, the amount withheld was capped at 10% of monthly benefits. But the Trump administration's lifting of that cap could cause serious financial hardship for seniors affected by overpayments. While such cases are rare, they typically result from agency errors and can come as a surprise to recipients, as it can be difficult to determine whether they were overpaid.

"People usually don't know they've been overpaid — they just get their benefits and assume the government is giving them the right amount," said Nancy Altman, president of Social Security Works, an advocacy group that advocates for the benefits.

She noted that such letters can leave people in despair: “When you get a letter from the government demanding that you return $10 that you don’t have, it’s very scary.”

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How many people are receiving excess payments

According to a 2024 report by the department’s inspector general, less than 1% of all Social Security payments are considered “improper.” And that includes not just overpayments, but underpayments as well. While that share is small compared to the $1,6 trillion in total payments each year, it amounts to billions of dollars in absolute terms.

From fiscal years 2015 through 2022, the department paid out about $72 billion in erroneous payments, most of which were overpayments. That’s 0,84% ​​of all payments during that period.

Why do overpayments occur?

According to the department, there are usually two reasons:

• Recipients fail to update their income information or report changes that affect payments.
• Department staff do not update recipient records on time.

Sometimes recipients simply don't realize they have to report certain changes because the Social Security system is so complex, with more than 20 pages of rules, the inspector general's 000 report found.

Errors can also be made by the department employees themselves, since in some cases they manually calculate complex benefits.

But there are cases of so-called strategic overpayments, said Ed Weir, a former agency employee who runs a YouTube channel about benefits.

In a recent webcast, Weir noted that seniors who start receiving benefits but continue to work may not know whether they will exceed the $23 annual income limit. Under the rules, the SSA withholds $400 in benefits for every $1 in income above that limit.

Some retirees think, "I'll wait until November or December because I don't know if I'm over the limit," Weir said.

Now, those who use this strategy may lose one or two months of payments due to the new deductions.

When will the new order come into force?

The Department of Social Security said it would begin withholding 100% of benefits for new overpayments starting March 27.

For those who received excess payments before March 27, the withholding will remain at 10%, as it does for recipients of the Supplemental Security Income (SSI) program, which is designed for low-income seniors and people with disabilities.

What Happens to Medicare If Your Entire Benefit Is Held Back

Experts warn that another problem for retirees who will have their benefits withheld in full could be Medicare. That's because most retirees pay their Medicare Part B premiums through an automatic deduction from Social Security.

It's unclear whether retirees will have to find another way to pay their premiums on their own or whether the department will allow them to pay for health insurance first and then withhold the remainder, Altman said.

"If you have Medicare, these deductions will cause you to be unable to pay for it and you will lose coverage," Weir said. "It will create a chain reaction of problems."

What to Do If Benefit Withholding Causes Financial Hardship

Before Biden's reforms capped deductions at 10% of benefits, some Americans faced severe financial hardship after receiving bills for thousands of dollars. Some even found themselves homeless in 2023 after their benefits were cut off, according to KFF.

However, recipients have the right to apply for a waiver of the overpayment refund using SSA Form 632.

“To do this, two conditions must be met: first, the overpayment was not your fault, and second, you have no way to get it back,” Weir explained.

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If you believe the overpayment amount is incorrect or you disagree that you received excess payments, you can file an appeal by completing SSA Form 561.

Finally, if your refund puts your financial situation at risk, you can request a change in the amount of withholdings.

"When it comes to Social Security and you disagree with the SSA's decision, file an appeal," Weir concluded.

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