Protect Your Retirement Accounts from IRS Levies
When it comes to safeguarding your financial future, protecting your retirement accounts from IRS levies is essential. An IRS levy is a legal seizure of your property or assets to satisfy a tax debt. Unlike a tax lien, which is a claim against your property, a levy actually allows the IRS to take money directly from your bank accounts, wages, or other assets—including retirement accounts in certain situations. Understanding your rights under tax law can help you shield your retirement savings effectively.
What Retirement Accounts Are Protected from IRS Levies?
According to the Internal Revenue Code (IRC) §6334, many types of retirement accounts enjoy federal protection from IRS levies, including:
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401(k) plans
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Traditional and Roth IRAs
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Pension plans
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Annuities
However, this protection is not absolute. Certain exceptions exist, particularly if the IRS believes the account funds were improperly accessed or rolled over. Understanding these nuances is critical to ensuring your retirement funds remain untouched.
Steps to Protect Your Retirement Accounts
1. Know Your Rights
The IRS generally cannot levy funds in qualified retirement accounts while they are held in a plan or IRA, but once funds are withdrawn, they may become subject to seizure. Review IRS Publication 590-B for detailed guidance on IRAs and distributions: IRS Publication 590-B
2. Consider an Offer in Compromise (OIC)
An Offer in Compromise allows you to settle your tax debt for less than the full amount owed, potentially avoiding aggressive collection actions, including levies. More info here: IRS Offer in Compromise
3. Set Up an Installment Agreement
Paying your tax debt through an installment plan can prevent the IRS from seizing your retirement funds. For eligibility and application, visit: IRS Payment Plans
4. Work With a Tax Professional
Navigating IRS levies and retirement account protection is complex. A tax attorney or certified public accountant (CPA) can provide personalized guidance and help you create a strategy that complies with tax law.
Key Takeaways
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Retirement accounts often enjoy federal protection under IRC §6334, but protection varies by account type and withdrawal status.
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Taking proactive steps—like negotiating a payment plan or consulting a tax professional—can prevent IRS levies.
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Being informed and prepared is the best defense for securing your financial future.
If you need professional guidance to protect your retirement accounts from IRS levies, contact us today. Our team specializes in tax law and retirement planning to help you safeguard your assets.
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