IRS seeks to levy TSP accounts of tax-delinquent feds

[tsptalk]

Thanks Stephen. I will post this link on our home page as well.

[Frixxxx]

Mr Losey,

Of the 276,000 people, on average thats $10,800/pp. I would like to know three things:

1. How many of these people are in negotiations to pay the IRS?
2. Why the IRS hasn't garnished retirees payouts?
3. Have the current employee defaulters been removed from classified work areas?

It is trivial to go after their TSP. I would venture to guess the majority of people don't have accounts or have minimal account balances.

Also, 97K is less than 5% of employees. This seems like SWEEPing change to punish the many, instead of the few.

[Elgallo]

That why we beleive none of what they say. They want EVERYONES MONEY! It's desperate times and those in control take desperate measures.

They are not to be trusted in my book!

[Silverbird]

That's kind of silly - Isn't the IRS free to garnish wages on unpaid taxes? So why not just do that? Or are they trying to catch one term Congressmen?

On the little details?
So...does this work like a loan that you have to repay to your own retirement?
I assume the money's subject to tax, since it's only tax-deffered.

Does this extend to other retirement 401ks besides that of the Federal Government, or are we being singled out (is that discrimination)?

[Frixxxx]

On the little details?
So...does this work like a loan that you have to repay to your own retirement?
I assume the money's subject to tax, since it's only tax-deffered.
Right, Can they force you to withdrawal, take a tax hit, to pay taxes?

Can't wrap my head around it!:suspicious:

[Scout333]

Frixxxx, Can't currently "make" you but they can apply enough pressure that you'll be happy to get the money out of the TSP or anywhere else it is stashed just to get them off your back. Realistically, if you have enough money left in the TSP it probably makes sense to take it from there as a loan since penalties and interest really add up on tax debt and the TSP loan has a low rate and you're paying yourself back. Change to allow levies against TSP funds is almost a moot point since anyone in Tax trouble probably has other debt and has already cleaned out the TSP kitty. More of a statement than an effective collection tool.

[Frixxxx]

Frixxxx, Can't currently "make" you but they can apply enough pressure that you'll be happy to get the money out of the TSP or anywhere else it is stashed just to get them off your back. Realistically, if you have enough money left in the TSP it probably makes sense to take it from there as a loan since penalties and interest really add up on tax debt and the TSP loan has a low rate and you're paying yourself back. Change to allow levies against TSP funds is almost a moot point since anyone in Tax trouble probably has other debt and has already cleaned out the TSP kitty. More of a statement than an effective collection tool.
Scout, I think Silverbird has it.....They should just garnish wages. That is how they do it in the real world....why get creative with fed employees?:suspicious:

[Scout333]

Good point Frixxxx, if employed that would likely be one of the first things they would go for. One of the pressure items I was talking about. Doesn't leave much for food and medicine.:( Could also affect retirees or others no longer currently working.

[Frixxxx]

Good point Frixxxx, if employed that would likely be one of the first things they would go for. One of the pressure items I was talking about. Doesn't leave much for food and medicine.:( Could also affect retirees or others no longer currently working.
Scary part is they walk amongst us.....:blink:

Contact EAP, get out of trouble......negotiate and pay.

Retirees, I don't know how to fix them.

[James48843]

I've worked for the govt for 20 years, and been a Union rep for 10 of those years. I am aware of perhaps a half-a dozen employees who got into tax trouble over all that time.

In every case, it was somebody who had a major unexpected expense- like the guy who's sister had cancer and was out of money, and the brother cleaned out most of his TSP account to help her, and then the following year had a huge tax payment that he couldn't make. The hospital got it's 150K from the poor guy, but he ends up with the 40K tax bill the next year, and tries to make arrangements with the IRS, but he's technically on the list of those considered a tax delinquent. So they go after him with everything they can, and he tries to keep his job and still make all the payments.


Seen it many times.

Sure, a law allowing the IRS to get the person's remaining TSP dollars would collect some of that back- but it isn't going to change the fact that a certain percentage of people will show up as being a tax delinquent. Sometimes it just happens.

[Frixxxx]

Should have filed for Insolvency.:suspicious:

[James48843]

Should have filed for Insolvency.:suspicious:

Sometimes I would say yes- or not taken out their TSP or 401(k) to cover something. But they do. The last one I had was a guy who lost his wife to cancer and incurred the debt in conjunction with that. When that kind of thing is going on, you don't always think straight.

Unfortunately, the first time I hear about such cases is usually the day they come in to do the disciplinary hearing for "failing to pay debts", which the penalty can be removal. Yes, they should have sought professional advice from a lawyer before incurring huge tax liabilities- but they don't. And they try and hold off things, only to pop up on the Agency's radar when they have a late payment on something- like their government credit card, which then triggers a credit report, which then uncovers the IRS debt, which then leads to double discipline charges- late on the credit card, and then failure to pay debts. Double whammy, a hearing, and then wham- they fire the person. Bad news all around.

My best advice to anyone is talk to a professional the minute something big comes along they haven't dealt with before- so they aren't getting themselves in a whole lot more than they bargained for.

[Silverbird]

All I have are those questions below. I'm [temporarily] in a cube so if I use the phone I may as well put my conversation on the PA system. :rolleyes:

[Scout333]

FYI, Union Pres. Colleen Kelley for NTEU spoke before Congress on this issue-

"Federal Employee/Retiree Delinquency Initiative (FERDI)
In 1993, IRS initiated the Federal Employee/Retiree Delinquency Initiative (FERDI), to promote
federal tax compliance among current and retired federal employees. According to the Internal
Revenue Manual, the program incorporates the purpose and intent of Office of Government
Ethics regulations 5 CFR 2635.809, discussed previously.
The broad objectives of FERDI are to enhance the federal government’s tax administration
process by improving the compliance of federal employees and annuitants with their
responsibility for filing tax returns and paying taxes, thereby helping to ensure the public’s
confidence in the tax system. The program combines reaching out to federal agencies to raise
their awareness of this issue and prioritizing IRS’ efforts to reduce its unpaid tax cases.
Beginning in 1993, the IRS began periodically matching its records of outstanding taxes and
non-filed tax returns against federal personnel records to identify federal workers and annuitants
who either had outstanding taxes or had not filed their tax returns. IRS entered into agreements
with the Defense Manpower Data Center, which receives personnel data files on many of the
government’s active and retired civilian and military workers, and the U.S. Postal Service, which
maintains and processes similar data for postal workers" Additional law not needed!

[Boghie]

The IRS should treat all taxpayers the same - thus, if they cannot levy 401(k) accounts (and equivalents) they should not be able to levy TSP accounts. A TSP account is a 401(k) account.

Mr. Losey,

The IRS already has FULL records of our income - that is not 100% certain in private industry.

The Treasury can 'borrow' from our most conservative cash equivalent fund held in our 401(k). Can the Treasury 'borrow' assets from your 401(k) money market?

And, more pertinent to your article, perhaps some - many - of these taxpayers have a legitimate conflict with what the IRS says is due. Guess what, the IRS is not always correct!

Finally, if the IRS gets this power it will have the equivalent for all retirement accounts.

[jayhawker]

If the IRS levies a TSP account, does the debtor have to pay income taxes on the amount levied and withdrawn? I know the debtor doesn't have to pay the 10% early withdrawal penalty, just curious if they have to pay taxes on the withdrawn amount as income.

Thanks,

J.

[tsptalk]

This is completely unofficial because I don't know for sure, but I am going to bet yes. The IRS will get their money. :)

[nnuut]

I believe they automatically take out 20% Federal no State. I took an early withdrawal before I retired and they did take out 20%. Took out $10,000 got $8,000.

[jayhawker]

I believe they automatically take out 20% Federal no State. I took an early withdrawal before I retired and they did take out 20%. Took out $10,000 got $8,000.

They take 10% Federal; no State. That's the 10% penalty for early withdrawal. However, if the IRS applies a levy to your account to collect taxes owed, you DO NOT pay the 10% penalty. It's an exception (#10 I believe.)

They say they will only levy retirement accounts as a last resort in an attempt to collect back taxes.

J

[nnuut]

I wasn't referring to a penalty, I paid no penalty only FEDERAL TAX at 20%, but I did get some of that back at the end of the year when I filed taxes. I was CSRS and had to be 59 1/2 to qualify for the one time partial withdrawal. Now I can only withdraw all, no more partial withdrawal, but can take some out on a monthly basis.

[burrocrat]

i don't know about irs levys, but there are lots of ways to get your money out of tsp. i've made it a hobby of mine. you can request a financial hardship withdrawl. there are some pretty detailed criteria you need to meet and self-certify to and then viola! big fat check in the mail. there are check boxes on the form to decline having the penalty and/or fed taxes taken out of the distribution. but it does get reported to the irs and you have to settle up at the end of the tax year. it gets folded into your gross income, and depending on your situation you could end up being zero, a little, or a lot. but if you take the distribution on jan 01 you can make the bastards wait for it 16-1/2 months until april of the next year without penalty.

bottom line is it wasn't taxed going in but the man gonna for dam sure get his pound of flesh when you go out.