A common belief is that pensions, IRAs, and 401Ks are safe from all creditors. When it comes to the IRS—don’t kid yourself. The IRS CAN levy pensions. While it can’t force you to liquidate such accounts, it can levy any proceeds from them. Here are three ways to shelter your retirement funds:
Go with a Payment Plan
The easiest (proactive) way to protect your pension, IRA, or 401K when you the IRS is to sign up for an IRS installment agreement so the IRS does not issue the levy in the first place. This is what most people do, and the long-term monthly bite may not be too painful— but it’s not the only option.
Negotiate with the IRS
A more attractive, more complex alternative is to make an Offer-in-Compromise (OIC) to clear your tax debt for less than you owe. Despite what you may have heard, the IRS does not ‘nonchalantly’ clear tax debts for ‘just pennies on the dollar’ but the agency will accept an offer that represents their best bet to collect from you, based on a formula that takes into account your current assets and future earnings potential.
Lump-Sum Out for Fixed Income Retirees
Retired people living on a fixed income typically have little chance of ever paying off their tax debts in full. The IRS is often willing to take a smaller lump sum payment in these cases in order to get the debt off the books.
If you or someone you know has received a Notice of Intent to Levy or has some other federal or Florida state tax issue, please feel free to contact me at either (352) 317-5692 or email jim@taxrepgainesville.com.
