How To Protect Your Retirement Account From Internal Revenue Service Seizure
Even though retirement accounts are protected from creditors, the IRS is an exception. The general rule is that if you can get it the IRS can get it too.
The Internal Revenue Service can seize all types of retirement accounts, including IRAs, 401k plans, and other self-employed plans like Keogh plans and SEP-IRAs. There are currently no prohibitions in the IRS code against it.
Many clients come to me who have been forced to live off of their retirement accounts because of being laid off. When they get the tax bill for the taxes owed and the 10% early distribution penalty, they have no way to pay the amount owed. If your only source of money is taking distributions from money still available in your retirement accounts, the IRS will expect you to liquidate the account to pay off the taxes.
How To Defend Your Retirement Accounts
In order to defend your retirement account(s) from Internal Revenue Service seizure is to know that the IRS can only get what you get. More specifically, if you can’t access your retirement money, neither can the IRS. How is this possible?
Many retirement plans deny you access to your retirement funds until you retire, die, become disabled or take a job with another company. Reference IRS Manual 18.104.22.168 for information about government seizures on retirement funds. Also, The IRS cannot force you to terminate your employment. As long as you stay employed, the IRS cannot have access to your retirement account. In this case the IRS will look at your wages and other personal assets to pay your back taxes owed.
However, if you have access to your retirement money, the IRS most likely has access to. Whether they will take money out of that fund depends on whether you conduct leading up to the tax liability was flagrant or not. Conduct deemed flagrant includes, fraud, tax evasion, or making contributions while taxes were not being paid. If you can show the IRS that your conduct wasn’t flagrant or that you depend on that retirement money, IRS manual 22.214.171.124 states that the retirement fund cannot be levied.
The IRS will back off if we can establish that they have no rights to your retirement money. Although, I have seen aggressive IRS officers levy wages, assets, and non-retirement assets, if retirement money is not withdrawn voluntarily.
The Internal revenue service is typically hesitant to take retirement money, and many times they have no rights to your retirement money, but proper negotiation, handling, and knowledge of this process is helpful to defend your precious retirement accounts.
Is the IRS trying to seize one of your retirement accounts? Contact Scott Allen, he has helped resolve over 108,000 tax debts, and has over 39 years of experience in dealing with the IRS.
Scott Allen E. A. Tax Debt Advisors, Inc taxdebtadvisors.com