Could the IRS go after retirement savings?

Millions of taxpayers find themselves owing money to the Internal Revenue Service, and not all of them owe excessive amounts. Many struggle to pay a tax debt that is less than $5,000. Thankfully, the IRS adheres to laws passed years ago by Congress regarding payment plans. Taxpayers owing less than $25,000 in tax debt may be eligible for an installment plan that does not come with any financial disclosure requirements. Setting up an installment agreement might be best for those struggling with tax debts. Texas retirees may find installment plans helpful since the IRS could seek a claim on retirement income.

Owing money and making arrangements to pay

An installment agreement allows someone to pay a minimum monthly amount until the balanced owed reaches zero. The taxpayer may pay the entire amount off at any time, and the IRS’s requirements for approval are minimal. However, individuals can expect to pay interest and penalty on the remaining balance.

Failing to set up an installment agreement could lead to collection action. Ignoring the IRS’s letters requesting payments may result in liens and levies on properties and accounts. The IRS might take action against retirement savings and pensions if an individual does not make arrangements to pay. The agency would not likely do so unless it had no other option, but it could take such steps to cover back taxes and related penalties and interest.

Dealing with the IRS

A taxpayer may receive a “balance due” notice and an “intent to levy” warning in the mail and do nothing. Perhaps the taxpayer doesn’t know what the letter states or disagrees with the assessment. Failing to make arrangements with the IRS might be the wrong step to take because the agency would likely commence collection action at some point.

Hiring an attorney who understands IRS tax law may be beneficial to someone who owes taxes. An attorney might represent the client to the agency and, if necessary, appear in tax court on the client’s behalf. An attorney may also help with requesting a payment plan.