{"id":4830,"date":"2016-07-11T05:09:49","date_gmt":"2016-07-11T09:09:49","guid":{"rendered":"http:\/\/www.escapeartist.com\/?p=4830"},"modified":"2020-12-23T08:56:17","modified_gmt":"2020-12-23T13:56:17","slug":"the-irs-can-take-your-retirement-account","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/the-irs-can-take-your-retirement-account\/","title":{"rendered":"The IRS Can Take Your Retirement Account"},"content":{"rendered":"

The IRS Can Take Your Retirement Account<\/strong><\/h2>\n

Many Americans think their retirement accounts are safe from creditors and from the US government. These people are wrong, very wrong. The IRS can seize your retirement account without notice and for any type of tax debt. The same goes for child support payments\u2026 if you owe, the government can take your retirement account.<\/p>\n

IRAs and 401Ks are our lifelines in our old age right? They are what we\u2019ll live on when we can\u2019t work any longer, right? Well, the US government could give a damn. They can take your retirement assets with a few clicks of their keyboard.<\/p>\n

If you owe money to the IRS or are concerned with an out of control government taking of your IRA, don\u2019t think for a minute that the rules which protect you from certain creditors apply to the Federal government. The IRS is exempt from all debt collection rules<\/strong>, including those pesky State Homestead, Retirement, and Pension Exemptions that so often get in the way of hardworking debt collectors.<\/p>\n

Obviously collecting money for redistribution is more important than allowing a backstop for Americans in their old age.<\/p>\n

The IRS has also exempted itself from the collection laws protecting ERISA plans. Our government may seize any amount in your ERISA plan that has vested. If you have a right to the money (ie. the account is \u201cvested\u201d) the IRS can get to it.<\/p>\n

Not to be content to simply exempting themselves from the rules, here\u2019s where the government gets really nasty when IRS takes your retirement account:<\/p>\n

When the IRS grabs your retirement account, you must pay tax on that money as if it were distributed to you<\/strong>. If the IRS takes $75,000 from you on June of 2015, you\u2019re required to pay tax on that amount as an IRA distribution when you file your 2015 tax return on April 15 of 2016. If you can\u2019t afford to pay the tax, that\u2019s your problem and the whole collection process starts again.<\/p>\n

For ordinary creditors, your retirement account is protected by Federal statute. Traditional and Roth IRAs are covered up to $1,283,025 by 11 U.S.C. \u00a7 522(b)(3)(C)(n). Under this law, virtually all retirement account and pension plan funds are exempt from civil creditors.<\/p>\n

This means that, if you file Chapter 7 Bankruptcy, you get to keep your retirement accounts. In Chapter 13 bankruptcy, because your retirement accounts are exempt, they won’t affect how much you must repay unsecured creditors. For more information, see Your Retirement Account in Bankruptcy.<\/p>\n

So, what can you do to protect your retirement account from the IRS? There is one, and only one option – take your IRA offshore before<\/u> you have a problem with Uncle Sam<\/strong>.<\/p>\n

It\u2019s illegal to move assets offshore for the purpose of keeping them away from the IRS. Of course the government has already put up barriers to prevent you from moving cash and assets out of their reach.<\/p>\n

As of this writing, you do have a right to seek higher returns and diversification offshore. You can form an offshore IRA LLC, open bank and brokerage accounts, and invest in more secure assets \u2013 primarily foreign real estate and physical gold – so long as you do it before you owe any money to the IRS.<\/p>\n