IRS Form 668-R — the Notice of Levy on Retirement Plans

IRS Form 668-R is used by the IRS to seize assets held in a retirement account to pay a delinquent tax liability. It is important to recognize that this is a seizure of an asset, not income. The IRS has a different form that they use to levy retirement income streams. The types of retirement account assets that are subject to levy are extensive. They include:

• Qualified Pension, Profit Sharing, and Stock Bonus Plans under ERISA

• IRAs

• Retirement Plans for the Self-Employed (such as SEP-IRAs and Keogh Plans)

• IRC 403(b) retirement plans

• Eligible deferred compensation plans described in IRC 457(b) which are maintained by an eligible employer under IRC 457(e)(1)(A)

These retirement accounts are protected from most creditors. However, the IRS has broad collection authority and can levy these retirement assets. 

Another consideration is the 10% early withdrawal penalty on retirement assets before the taxpayer reaches the retirement age. It is a significant penalty that should be considered whenever unpaid taxes are owed to the IRS. If a taxpayer withdraws retirement funds voluntarily, the 10% penalty is possible. In addition, income taxes are incurred on distribution.

The best course of action is to enter into an agreement with the IRS to avoid any levies as soon as possible. 

Contact us if you are in this situation and need help. We can create a strategy and action plan to address the issue.