I’m Retired And I Have Tax Debt, What Now? Part 1: Retirement Assets

Taxpayers that retire with unpaid tax debt seemingly face a grim retirement because of the thought that assets reserved and necessary for retirement will be taken by the IRS. Here is the first part of our blog on what retired taxpayers may expect in dealing with the IRS regarding certain assets such as retirement accounts.

In most situations, the IRS exercises the utmost caution seizing retirement accounts from retired taxpayers.  It is considered bad policy and bad public relations to take assets from senior citizens no longer work and are extremely dependent upon what remains in a retirement account. Thus, the IRS tends to seize retirement accounts only in situations where the subject taxpayer is guilty of extreme noncompliance. Levying retirement accounts usually requires that the IRS assign a Revenue Officer to handle a particular case. Until contacted by a local IRS collection agent, taxpayers are probably not at risk of any seizure.

Pursuant to Internal Revenue Manual 5.11.6.2., Funds in Pension or Retirement Plans, The IRS must consider three factors or ask three questions before levying a retirement account: First, is the taxpayer able to make alternate arrangements to repay the IRS without having to utilize retirement account funds?  Second, did the taxpayer engage in any flagrant conduct in accruing the tax liability? This conduct includes tax fraud, tax evasion, income from illegal sources, and failing to cooperate with the IRS. Finally, if the money in a retirement account is necessary for a retired taxpayer to pay monthly bills, then the IRS will not subject him or her to an economic hardship by taking the funds from a retirement account.

If you are over the age of fifty-five (or approximately) and owe past tax debt, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.I'm Retired And I Have Tax Debt, What Now? Part 1: Retirement Assets

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