What Happens If The Social Security Administration Overpays You

One day, you might log into your bank account and find a deposit for $2,200 as your monthly Social Security benefit. After confirming the previous month's payment was the usual $1,500, you will suspect an overpayment. What you do after this will determine if you will end up like the Michigan couple, Dave and Rose Wilder, who unexpectedly got a notice that they owed the government $84,000 as a result of overpayment in Social Security benefits.

A common reason for overpayment is a change in your income. If you start earning more money while you receive benefits and forget to tell the SSA, they might continue to pay you as if you hadn't had an increase in income. Similarly, if a person with disability sees an improvement in their health that should stop their benefits, and they don't report this change, they'll probably get more money than they are supposed to.

Getting married to your soul mate, remarrying, or getting a divorce can also change how much benefit you get. Now when the SSA finds the error, you will receive a Notice of Overpayment. This will notify you about the mistake by mail, how much you owe, and how you will pay it back or a suitable payment plan. If you ignore the notice, it will not make it go away; instead, the sum could be taken out of your future benefits.

Note, if you do not receive the notice because you did not check your mail, the Social Security Administration (SSA) still assumes you have been notified. When you do check and find a Notice of Overpayment, read through it to be sure the claim is not false (contact a financial advisor if it seems too confusing). If you spot any inaccuracy, challenge it through an appeal; it means you argue that the overpayment wasn't your fault, or that the amount they say you owe is not correct with evidence, such as documents that show you reported changes in your income or proof of an error in the figures listed by the SSA. 

Do not send a letter or email your local SSA office for this. Instead, use Form SSA-561 and you will find a section to explain why you believe the decision was incorrect. The second option depends on how you feel about the notice. If you think the overpayment wasn't your fault and you can't afford to pay it back, or you find it otherwise unfair, you can request a waiver using Form SSA-632. Now, there is a third option using Form SSA-634 but only when you agree that you were overpaid and you don't want to challenge it, but can't pay it all back at once and want to set up a repayment plan.

Currently, the Social Security Administration (SSA) holds back either 10% of your Social Security payments or $10 each month, depending on which is more. So this sum, accumulated, can offset the burden of overpayment. If it doesn't work for you, you can adjust your repayment plan by filling out Form SSA-634. The SSA, typically, would have a solution that suits your financial situation so you do not face hardship from a mistake.

You might ask, "I no longer receive benefits so how do I repay?" In that case, Uncle Sam might take a piece of your income now and then, or you could pay up using your tax refund. Sometimes, a family member connected to your Social Security account can help foot the bill; couples on Supplemental Security Income (SSI) can have the overpaid amount collected from either partner and the debt can be settled without too much hassle. 

You can avoid an overpayment bill by updating the SSA about any big changes in your life; a new job, a divorce, or a health update. We recommend you do this online by logging into your "My Social Security" account on the SSA website as its best for quick updates on income changes, work status, and personal details like address or banking information. Still, mistakes happen, but catching them early, like these mistakes that could cost you your Social Security benefits, can help keep your benefits on the straight and narrow.