If the IRS is coming after you for an unpaid tax debt, the most important step you can take is to contact an experienced tax attorney. Attempting to resolve your tax issues without legal guidance puts you at a substantial disadvantage. The IRS has significant resources at its disposal and may pursue all of your assets to collect on the unpaid debt, including your 401(k).
IRS Collection Efforts and Your 401(k)
In order to prepare yourself for IRS collection action against your retirement assets, it is important to understand the following:
- Before the IRS can place a tax lien or levy on your account, you will be given the option of paying your tax debt.
- The IRS will likely place a federal tax lien on your 401(k) before taking additional action. The federal tax lien serves to put other parties on notice that you owe the IRS money.
- The IRS will next issue a notice of intent to levy.
- After the notice of intent to levy is issued, the IRS will issue a notice of levy on the 401(k) plan.
- If the IRS places a notice of intent to levy on your account, you may negotiate a payment arrangement. This will stop the collection action and prevent the account from being levied.
- If you fail to make the required payments to the IRS under the payment arrangement, the IRS may then resume collection action on the 401(k).
Finding the best possible solution to your tax problems requires an understanding of the how the IRS debt collection process works. To learn more, we encourage you to check out our free guide, The Ultimate Survival Guide for IRS Problems.