If the IRS Wants Your 401(k) for Tax Debt, Make Them Go Get It

Owing money to the IRS can create a significant amount of strain in your life. Depending on the amount of unpaid tax debt that you owe, the IRS may come after you with all they’ve got. For many people, a retirement account may be their largest asset. It is important not to utilize this asset to pay an unpaid tax debt, however, without first consulting with an experienced tax attorney.

Why NOT to Withdraw Money From Your 401(k) to Pay IRS Tax Debt

When the IRS is seeking payment for unpaid tax debt, you may be required to complete Form 433. This form tells the IRS the nature and location of your assets. Your 401(k) is listed on this form. You will also be required to reveal the trustee of the 401(k). With this information, the IRS can seize the assets in the 401(k). The IRS may ask you to withdraw money from the 401(k) in order to pay your tax debt. This is generally not recommended, however. That is because there is a 10% tax on the amount of the 401(k) withdrawn before age 59 ½. Instead, it may be better to make the IRS levy the 401(k) so that you can avoid the tax.

While an unpaid tax debt is never a pleasant situation to deal with, we can help you find a resolution to your problem. We encourage you to learn more about the experience of our past clients by checking out our client testimonials today.

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