There are many myths circulating about what happens to your tax debts after retirement. You might have heard from someone that the IRS will seize your retirement accounts and suddenly, you are worried about your future security instead of enjoying retirement. We will try to clear your mind through this article about tax debt and how the IRS handles it after your retirement.
General Rules For Retirement Accounts in Detroit, MI
A general rule the IRS follows is to go soft on retirement accounts and retirees as it doesn’t usually serve the purpose to seize and lien properties and accounts of retirees. It is also not good for the image of the IRS.
Following is the step by step discussion on all the relevant points about our topic.
What happens to your Funds: as we told before, as long as you are compliant, the IRS doesn’t come after your retirement funds. If you are still employed and haven’t reached the age of 59 and a half, the IRS cannot come to your 401K account. But if you do have tax debt, you also can’t withdraw your retirement funds.
Will the IRS come after your retirement account: In theory, it is possible that the IRS may come after your retirement account if you don’t cooperate with them. However, the amount you have in your account and the debt you owe to the IRS play an important role in this regard. Coming after your retirement account isn’t an easy task, and it involves a lot of effort and paperwork. So if the tax debt is significantly bigger than the money you have in the account, the chances are the IRS will use some other method to collect the tax.
Compliance with IRS: IRS doesn’t push for early collection if the taxpayers are complying with them. The department knows and understands that the circumstances aren’t the same for everyone all the time, and we face hardships from time to time. If you come clear and cooperate with them, they have many options for you to dispose of your tax debt conveniently.
Are you at risk? As long as you are not contacted by an IRS representative, you are safe. Coming after you with a hard stick for tax collection isn’t an easy task for the IRS. They need local field agents to pursue collection tactics against taxpayers. They notify and send soft notices before doing any hard work because in most cases, taxpayers cooperate with the IRS, and there is no need for hard measures.
Your Social Security: If yours isn’t the worst case for the IRS, it isn’t a possibility that the IRS will touch your Social Security Income. Even if it does, they can only take 15% of your SSI. Furthermore, if you think that you cannot afford to give that 15% to the IRS, you can prove your hardship and stop the IRS from levying your SSI.
Tax Settlement: Retirement is all about peace of mind and living your life with stress. You have the option to settle your tax debt with the IRS by using Offer in Compromise where you offer them a lesser amount you can easily pay.
Statute of Limitation: Before finalizing any deal with IRS, make sure that your tax debts don’t include any amount older than 10 years, as after that years, IRS’s statute of limitation to collect tax expires and the IRS cannot collect that amount.
We advise you to be proactive and sort your taxes 2, 3 years before retirement. Also, be very cooperative and compliant with the IRS. As long as you do that, there isn’t much to worry about. Contact USA Tax Settlement for professional help.
Zee Maq is a content writer who specializes in writing business and finance content. She has nine years of experience and loves to provide problem-solving content to help people tackle challenges in their everyday lives.