Private & Public Employees: What Can be Levied?

While many taxpayers understand their current wages or salaries, or their checking or savings accounts, can be levied by the IRS, many are unaware of the vulnerability of their retirement savings accounts.

These types of accounts are subject to be levied by the IRS no matter if the taxpayer is a public or private sector employee. Individual Retirement Accounts (IRAs) or 401ks are allowed to be levied by the IRS to pay any back taxes owed. For taxpayers who are unable to access their account, the IRS may place a lien against it until the taxpayer is allowed early withdrawal. For retirees, any payments made from IRAs or 401ks can be levied, while the account as a whole is factored in when calculating finances for IRS settlements or installment plans.

With over 279,000 federal workers, including military personnel and members of Congress, owing over $3.4 billion dollars in back taxes, the IRS has placed a set of rules and requirements for public workers on how retirement accounts can be levied, much like the rules for public employees.


Currently, a TSP is bound by the same rules as IRAs and 401ks, though these rules have been accepted by the Office of Legal Counsel, a part of the Justice Department that handles disputes between federal agencies, the Thrift Investment Board TIB is challenging the rules by stating the language within the statute implies federal retirement accounts cannot be levied for back taxes because of a conflict of law.

Sen. Orrin Hatch (R-UT) wants to clarify that TSP accounts are in fact allowed to be levied through a new bill. With this legislation in place, the TIB would have no choice but to honor a Notice of Levy from the IRS.

Why is this important?

Out of the $3.4 billion owed to the IRS by public sector employees, over 50 percent of the total public sector tax debt is consumed by postal workers, active military, and retired military veterans, making their retirement just as vulnerable to being levied as their wages or bank accounts.

If you are a public or private sector employee that has a retirement account exposed to being levied by the IRS because of back taxes, you should seek counsel today! For a free consultation on how to protect your retirement, call 888-415-1337 or fill out the form to get an affordable solution to your back taxes. Call now!

Labels: ,