What can the irs take

what can the irs take

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The IRS Levy Process

The process by which the IRS is able to outright seize control of retirement accounts or other financial assets is called a levy. Before the IRS performs a levy, the agency will attempt to contact you by sending a certified with a notice of intent to levy. Once you receive that letter, the IRS may begin the levy process between 10 and 30 days later, depending on the situation.

Exemptions from Levy

Section 6334 of the Internal Revenue Code outlines the specific classes and amounts of assets that are exempted from IRS levies. Specifically, these include basic living and professional necessities, such as up to $7,720 in furniture and household goods, up to $3,520 in tools necessary for your trade, clothing and school books for the taxpayer's family. The IRS also exempts any wages necessary for child support payments ordered by a court. Finally, the IRS will not seize your residence to satisfy a tax debt of $5,000 or less.

Treatment of Retirement Assets

Retirement assets are not protected against an IRS levy. The

IRS can and frequently does seize certain kinds of retirement assets to satisfy tax debts. While IRAs do receive significant protection up to $1 million against other creditors, that protection does not apply to the IRS. The general rule is that if you have control of the asset, the IRS can reach it in a levy.

Employer Assets

In some instances, retirement assets do receive de facto protection even against the IRS. For example, assets in employer pension funds are not the property of the taxpayer, even though the employer holds the assets on the employee's behalf. The employee does not hold title to the funds, nor does the employee control them. The same is true of 401k plans, where the plan documents prohibit the employee from accessing the assets while employed at the company. Meanwhile, the plan sponsor has a fiduciary duty to the employee not to release funds held for the employee to any other entity, including the IRS. When this is the case, the IRS will place a lien on the asset, and move to seize income when the employee finally withdraws it.

Source: ehow.com

Category: Taxes

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