Can the IRS take your pension for back taxes? Well, the answer is…maybe. While the IRS does have the authority to garnish wages and bank accounts to collect on unpaid taxes, there are some restrictions.
So, what are the restrictions? Do you have to worry about the Internal Revenue Service taking your retirement funds?
In this article, we’ll explain the circumstances that will put your retirement account in jeopardy. Read on to learn more.
Can the IRS Take Your Pension for Back Taxes?
Generally speaking, retirement funds are protected from creditors. This means that, even if you owe money to the IRS, they cannot simply take money out of your retirement account to satisfy the debt. There are, however, some exceptions to this rule.
One exception is if you failed to pay your taxes for a number of years, and the IRS filed a tax lien against you. A tax lien gives the IRS a legal claim to your property, including your retirement account, as collateral for the unpaid taxes.
If you don’t pay the taxes or make arrangements with the IRS to pay the debt, they can then take money out of your retirement account to satisfy the debt.
Another exception is if you have been ordered to pay alimony or child support and have fallen behind on your payments. In this case, the IRS can garnish your retirement account to make up for the unpaid support.
If you are facing tax debt, it’s important to speak with a qualified tax professional to discuss your options and ensure that your retirement account is protected.
How Will I Know if the IRS Plans to Garnish My Pension?
If the IRS plans to garnish your pension, they will first send you a notice that explains their intentions and how much money they plan to take. This notice will also provide information on how you can appeal the decision or negotiate a payment plan.
If you do not respond to this notice, the IRS will begin garnishing your pension payments until the debt is paid in full.
You can avoid having your pension garnished by the IRS by staying current on your taxes and responding to any notices you receive in a timely manner. If you are unable to pay your tax debt in full, you should contact the IRS to discuss your options. By working with the IRS, you can avoid having your pension garnished and keep more of your hard-earned money.
Keep in mind that working directly with the IRS isn’t quite the way to go. If you’re struggling to pay back taxes, you need an experienced tax resolution service on your side that can help you negotiate with the IRS and settle your tax debt.
Can the IRS Levy Other Retirement Accounts?
The Internal Revenue Service (IRS) has the authority to levy many types of retirement accounts in addition to pensions. This includes both public and private sector retirement plans, such as 401(k)s, 403(b)s, 457s, IRAs, and Keoghs.
The IRS may levy these accounts to collect unpaid taxes, penalties, and interest. When the IRS levies an account, it seizes a portion of the funds in the account to satisfy the debt owed. The amount seized depends on the balance of the account at the time of the levy and the amount of tax owed.
They typically give taxpayers notice before levying their retirement accounts. This notice gives the taxpayer an opportunity to pay the tax owed or to arrange for a payment plan. The notice also includes information on how to appeal the levy.
If the IRS does levy your retirement account, you will receive a notice. This notice will list the amount of money owed and the date by which it must be paid. It will also provide instructions on how to appeal the levy.
Appealing an IRS Levy
If you believe that the IRS levied your account in error, you can file an appeal. This must be done within 30 days of receiving the Notice of Intent to Levy. To appeal, you must file a Form 9423 with the IRS.
You can also request a hearing with the Office of Appeals. This is an independent body within the IRS that reviews appeals of tax-related matters. To request a hearing, you must file Form 12153 with the IRS.
How Much of My Pension Can the IRS Garnish?
The IRS can garnish a portion of your pension to satisfy unpaid taxes. The amount that can be garnished depends on several factors, including the type of pension you have and the size of your tax debt.
For most taxpayers, the maximum amount that can be garnished from their pension is 15 percent. However, if you have a substantial tax debt, the IRS may be able to garnish up to 100 percent of your pension.
There are several types of pensions that are subject to garnishment, including private pensions, government pensions, and military pensions. If you have a private pension, the amount that can be garnished is generally capped at 10 percent of your total benefits.
If you have a government pension, the garnishable amount is generally capped at 15 percent of your total benefits.
Military pensions are exempt from garnishment. However, if you have unpaid taxes, the IRS may be able to garnish your military pension by up to 25 percent.
The amount of your tax debt also affects the amount that can be garnished from your pension. For example, if you owe more than $50,000 in taxes, the IRS may be able to garnish up to 100 percent of your pension.
Tax Tips for Protecting Your Retirement Funds
The big question is, “Can the IRS take your pension for back taxes?”
Unfortunately, they can. The good news is, we can help! If you had trouble paying taxes in the past, and now you’re facing garnishment, let us work on your behalf.
At Fiscal Solutions, we offer a variety of services and resources to get you back in good standing with the IRS. If you’re interested in learning more, don’t hesitate to contact us. We’re here for you!