Tax Debt and Retirement Accounts: What the IRS Can and Cannot Touch
The IRS can levy retirement accounts. But in practice, they rarely do, and Florida law adds another layer of protection.
Technically, the IRS has the legal authority to levy retirement accounts — 401(k)s, IRAs, pensions, and other qualified plans. In practice, IRM 5.11.6.2 requires a managerial approval before levying retirement accounts and instructs Revenue Officers to consider the taxpayer's age, time until retirement, and available alternatives.
Florida provides additional protection. Under Florida Statute 222.21, assets in qualified retirement plans are exempt from creditor claims, including IRS liens (though not levies). This exemption reduces your Reasonable Collection Potential in OIC calculations, lowering your offer amount.
Strategic Implications
Between Florida's homestead exemption and retirement account protections, many Florida residents have near-zero asset equity for OIC purposes. Combined with allowable living expenses that exceed income, this produces very low offers — sometimes pennies on the dollar on large balances.
Tax attorney Darrin Mish has spent 32 years getting taxpayers out of IRS trouble. Free consultation — no obligation.
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