The Internal Revenue Service has the ability to seize your 401k, IRA, Roth IRA and pension if you owe them back taxes and are unable to pay. In some cases the IRS will even go after your social security as payment for back taxes.
Property Levy Of Your 401k
In most cases the IRS won’t go after these types of accounts unless they are given no other choice. The situation must be a very extreme one for them to pursue your retirement accounts for payment of unpaid taxes.
The first thing that the taxpayer needs to do is create an unpaid tax liability. The IRS will notify the taxpayer of these unpaid taxes and ask them for some kind of payment. The taxpayer must ignore these notifications for the IRS to move on to the next step in securing payment from the taxpayer. There is some leeway in terms of missing a notification but eventually the IRS knows the taxpayer is avoiding them.
The last step will be the IRS notifying the taxpayer of its intent to levy property owned by the taxpayer. The property it intends to levy is usually things other than your retirement accounts initially. Once those other assets have been exhausted it will then begin to levy the taxpayer’s retirement accounts. This will only occur if the taxpayer blatantly try’s to avoid paying and or setting up a payment plan with the IRS.
The IRS Will Work With You
The IRS can be relatively easy to work with if you know how to handle these types of situations. They want the taxpayer to be honest and work with them to come up with a compromise on the amount to be paid or setup a payment plan the taxpayer can afford to pay every month.