The IRS has the obligation to go after tax debts that are owed to the government. When you are delinquent in paying your taxes, you can expect the IRS to contact you and use all legal means to settle your account.
One of the primary ways that it will take care of your debt if you are in default is by levying assets like your retirement benefits and pension. You can protect your finances by knowing what funds the IRS can legally claim and what steps you can take to prevent an IRS levy.
Assets that the IRS Can Levy
Federal law gives the IRS ample leeway when it comes to collecting a debt that you owe to the federal government. In fact, few assets are exempt from being claimed. When you owe an outstanding tax debt, it can legally levy retirement assets like:- Social Security payments
- Civil service pensions
- Military pensions
- Retired railroad worker benefits
- Employee or self-sponsored retirement accounts like IRA and Keoughs
Off-Limit Assets
Despite being able to claim a variety of retirement assets and benefits, the IRS cannot legally levy other benefits and pensions that you may have. For example, it cannot claim:- Supplemental Social Security for the elderly
- Workers compensation benefits
- Public assistance payments or cash welfare
- Employer-sponsored retirement account withdrawals
Levy Percentages and Amounts
So how much can the IRS claim of your benefits and retirement pension? In truth, the federal government prevents the IRS from claiming all of your money.
However, it can claim as much as 15 percent of payments made from funds like retired railroad worker pensions and Social Security benefits. You should note that in 2012 the IRS adopted a new policy of typically avoiding going after these particular pensions and instead targeting other assets to satisfy people's tax debts.
Settling Your Tax Debt and Saving Your Retirement and Pension
When you realize that your IRS debt will not be erased simply because you are retired, you may wonder what steps you should take to settle your account and protect your pension. Your best option to wipe out your IRS debt involves paying it off entirely.
If you have the monetary means to zero out your account, you should use this option first. This suggestion could mean liquidating assets like jewelry, cars, or real estate. It also may mean cashing in a life insurance policy. However, if you can pay off your debt without putting yourself in financial jeopardy, you should make every attempt to do so to protect your retirement.
If you cannot pay off your account, your next best option to protect your pension and retirement benefits involves contacting the IRS and setting up an installment agreement or payment arrangement. Your payments would be based on what you earn or bring in each month in income. You must pay on your debt for 10 years or until it is satisfied in full.
The IRS by law can levy the money you are entitled to once you retire. You can safeguard these funds and live your retirement in peace without the fear of an IRS levy by knowing what steps to take to settle your delinquent tax debt now.
