I work for the state government and I have a pension and deferred compensation plan through my employer, which is the state. I have a federal tax lien (NOT a levy) on my property for about $30,000 (which includes interest and penalties) caused by a messed up inheritance. I plan to leave state employment in the near future in search on greener pastures. My pension and deferred comp. are not not enough to cover the lien amount. If I leave state employment and cash them out, will the IRS take them? I plan to pay off the lien when I sell the house, though.
I have an IRS tax lien on my property. If I leave my job and cash out my pension and deferred compensation, will the IRS take them?
Unless your account is assigned to a revenue officer in a field office who is poking around looking for assets, IRS will not levy on your retirement account. As a matter of general policy it won’t normally levy on that at all and if it did it would require approval from upper management.
Before you do cash out your retirement fund consider what you are giving up because you may not get the benefit of employer contributions. If it is a 401(k) type plan you can roll it into a traditional IRA and not generate any tax liability.
Additionally, are you keeping your head in the sand or are you doing something to deal with the tax liability? If you jump through the proper hoops and make arrangements for payment the filed notice of tax lien can be withdrawn which means that retroactively it never existed.
Just because the IRS “claims” you owe a tax debt, does not mean that you do. If a return was filed incorrectly creating the liability, then it can be amended if within statute. If not, an OIC based on doubt to liability can be submitted for consideration. To answer your question, if you take out your deferred compensation and start taking your pension, the IRS will not come take it out of your hands. However, if you do not address the situation it can get out of control. The IRS may levy your wages and or bank account and can levy up to 15% of your pension when you start receiving if if the CSED has not expired. Question: From what year does this liability come from? One of many questions that begged to be asked! It may be in your best interest to hire an Enrolled Agent, such as myself, or one in your area if preferred to handle this case for you. Don’t pay what you don’t owe and only pay what you can afford to if you do truly owe!
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