Yes. A 401(k) is not exempt from an IRS levy, and neither is an IRA, a 403(b), a 457(b), a SEP, a SIMPLE, or a Keogh. The anti-alienation rules that generally protect qualified retirement benefits from creditors contain a written exception for federal tax levies.
It is also a collection action the IRS treats differently from an ordinary levy, because retirement accounts provide for the taxpayer’s future welfare. Its own manual requires a revenue officer to clear three separate steps, document each one, and get a Director’s signature before issuing a retirement levy. Two of those steps expressly prohibit the levy: if the taxpayer has not engaged in flagrant conduct, or needs the retirement assets for necessary living expenses, the manual says not to levy. Most people asking this question are nowhere near that line.
No. It is protected from almost everyone else, and the exception for the IRS is written into the regulations rather than directly into IRC § 401, which is an easy distinction to miss.
The protection itself comes from IRC § 401(a)(13) and ERISA § 206(d), which require a qualified plan to provide that benefits cannot be assigned or alienated. Neither provision mentions federal tax levies at all. The word “levy” does not appear in IRC § 401.
The carve-out is in Treasury Regulation § 1.401(a)-13(b), and it is unusually direct. Paragraph (b)(1) lists “levy” among the processes a plan must block. Paragraph (b)(2) then says that the provision “shall not preclude” two things:
(i) The enforcement of a Federal tax levy made pursuant to section 6331.
(ii) The collection by the United States on a judgment resulting from an unpaid tax assessment.
That is the whole answer to “but isn’t my 401(k) protected?” It is protected, and the regulation intentionally writes the IRS out of the protection.
The levy power itself comes from IRC § 6331(a), which reaches “all property and rights to property” except what § 6334 exempts. Retirement accounts are not on the § 6334 list.
Nearly all of them. The Internal Revenue Manual lists the plan types that are not exempt, and the list is close to comprehensive.
| Account type | Reachable by IRS levy? | Note |
|---|---|---|
| 401(k) | Yes | Exposure depends on the plan’s withdrawal and vesting provisions |
| Traditional and Roth IRA | Yes | A taxpayer-owned IRA is generally subject to levy because the owner generally has a present right to the funds |
| 403(b) | Yes | Named in the IRM |
| 457(b) eligible deferred compensation | Yes | Named in the IRM |
| SEP-IRA, SIMPLE, Keogh | Yes | Self-employed plans are named in the IRM |
| Qualified pension, profit sharing, stock bonus plans | Yes | ERISA plans are named in the IRM |
| Thrift Savings Plan | Yes, and further than the others | 5 USC 8437(e)(3) lets the levy reach the full vested balance |
| Railroad Retirement, Medal of Honor, military survivor annuities | Exempt from ordinary levy | But still subject to a 15 percent continuous levy, see below |
The Thrift Savings Plan is the one genuine outlier, and it cuts against federal employees. For every other plan, a levy reaches only your present rights. For the TSP, a special statute authorizes turnover of the vested balance, including amounts that will vest within 30 days of the levy.
Four narrow categories, none of which is a private plan. IRC § 6334(a)(6) exempts annuity or pension payments under the Railroad Retirement Act, benefits under the Railroad Unemployment Insurance Act, special pensions for people on the Medal of Honor roll, and annuities based on retired or retainer pay under chapter 73 of title 10.
That is it. Section 6334(c) closes the door on anything else: no property is exempt from levy other than what subsection (a) specifically exempts.
IRC § 6331(h) reaches Railroad Retirement and Railroad Unemployment payments for a continuous 15 percent levy despite the § 6334 exemption. Section 6331(h)(2)(C) brings those payments within the continuous levy, and section 6331(h)(1) applies it “notwithstanding section 6334.” Exempt under § 6334 does not mean untouchable.
Two other exemption amounts are indexed each year and matter in a broader collection case. For 2026, the property exempt under § 6334(a)(2), meaning fuel, provisions, furniture, household effects, arms, livestock and poultry, cannot exceed $11,980. Books and tools of a trade under § 6334(a)(3) cannot exceed $5,990. The wage exemption calculation under § 6334(d)(4)(B) uses $5,300 for 2026. Those figures come from Revenue Procedure 2025-32 and change annually. Our page on IRS seizure exemptions covers the full list.
This is where the real protection lives, and it is procedural rather than statutory. IRM 5.11.6.3, revised March 14, 2024, sets out a mandatory sequence for levying the assets in a retirement account, and requires the revenue officer to document each determination in the case history.
The section opens with the reason for the procedure: “Because these retirement vehicles provide for the taxpayer’s future welfare, levy on the assets in a retirement account (as contrasted with income from the account) only after following the procedures set forth below.”
The revenue officer must identify what property is available, retirement and non-retirement, and consider the alternatives before issuing the levy. If other property can satisfy the liability, or a payment agreement can be reached, those come first.
This is the step a good payment plan resolves. An installment agreement reached before the analysis is complete usually ends the inquiry.
The manual does not describe flagrancy as a factor to weigh. It states a prohibition: “If the taxpayer has not engaged in flagrant conduct, do not levy on retirement accounts.”
That sentence is the most useful thing in this section to know. Falling behind on taxes, even badly, is not flagrant conduct. The manual also says extenuating circumstances may mitigate flagrancy and gives examples: illness, loss of employment, the loss of a family member or loved one, identity theft, return preparer misconduct, embezzlement, and acts of nature.
The final step asks whether the taxpayer depends on the money in the account, or will in the near future, for necessary living expenses. If so, the instruction is again a stop: do not levy the retirement account.
The officer uses the financial analysis standards in IRM 5.15 to establish necessary living expenses, and the life expectancy tables in Publication 590-B to estimate how much could be withdrawn annually to deplete the account over the taxpayer’s remaining life. The analysis also considers special circumstances, extraordinary expenses, and other retirement income sources.
One more line from the same section is worth quoting, because it rebuts a pressure tactic taxpayers hear: “An imminent collection statute expiration date (CSED), alone, does not justify levying on retirement assets.”
The manual lists thirteen examples, far more specific than the two or three most competing pages mention. Under IRM 5.11.6.3(6), flagrant conduct includes taxpayers who:
Two of those examples turn on voluntary contributions, and a taxpayer who was automatically enrolled in a workplace plan generally qualifies for a safe harbor without knowing it. The manual carries this caution twice: when the taxpayer verifies they were automatically enrolled to have a limited percentage of basic pay deducted into a retirement account, do not consider this flagrant conduct.
Automatic enrollment is now required for new 401(k) and 403(b) plans under the SECURE 2.0 Act, starting with the 2025 plan year. If your contributions kept running because you never opted out, that is not what the manual is aiming at. A parallel safe harbor applies to contributions made after a bankruptcy petition where the liability was discharged.
A Director. Not the revenue officer working your case, and not that officer’s manager.
The manual requires Form 668-R, Notice of Levy on Retirement Plans, and says its use is mandatory in place of the ordinary Form 668-A. Approval runs through Form 15000, Request for Approval of Levy on Funds in Pension, Retirement Plans or TSP Account, submitted through an internal eApproval platform, and the instruction is to “have the SB/SE Director, Collection Area approve the Form 668-R.”
That is several rungs above the person on the phone. It is also a useful reality check when a levy is being described to you as imminent.
A notice of levy attaches to your present rights under the plan. It does not accelerate payment, and it does not create a right you do not already have. If the plan’s terms bar a withdrawal today, nothing gets collected today.
The manual’s own two examples make the rule concrete.
In the first, a taxpayer is fully vested in a $10,000 balance but is not yet in payout status or entitled to a lump sum until a future date. The levy attaches to the present right to that $10,000, but nothing can be collected until the withdrawal right matures. By that future date, the account may have grown to $30,000. Without a new levy, only $10,000 can be collected, because that was the present right when the levy was served.
In the second, the plan allows no lump-sum withdrawal, and the taxpayer is zero percent vested in the employer-derived benefit. There is no present property right for the levy to attach to. A levy can reach the taxpayer’s own contributions, since a participant is always fully vested in those, but collection still depends on whether the plan permits a withdrawal.
The practical consequence is that a 401(k) is usually more exposed than a defined-benefit pension, because 401(k) plans typically permit an in-service or post-separation withdrawal, so the present right exists and the levy bites. A pension with no lump-sum option often has nothing available to take.
Three things happen, and only one of them is widely known.
| Consequence | Applies to a levy distribution? | Authority |
|---|---|---|
| Ordinary income tax on the distribution | Yes. The distribution is taxable income | IRM 5.11.6.3(15) |
| 10 percent additional tax on early distribution | No. There is an express exception for levies | IRC 72(t)(2)(A)(vii) |
| 20 percent mandatory federal withholding | Yes, and it comes out first | IRC 3405(c), IRM 5.11.6.3(17) |
The withholding rule surprises people on both sides. The manual states that levied funds are subject to 20 percent withholding by the payor, and “a levy will only reach the levied funds that remain after such withholding.” Its example: the taxpayer owes $10,000 and has $5,000 in the plan. The levy proceeds are $4,000, and the withholding is $1,000.
The 10 percent exception is nineteen words of statute. IRC § 72(t)(2)(A)(vii) excepts distributions “made on account of a levy under section 6331 on the qualified retirement plan.” The IRS proves it in writing at the time: the manual directs that Letter 3257 go to the plan administrator and Letter 3258 go to the taxpayer, both stating that the early withdrawal excise tax is not due even if the taxpayer is under 59 and a half.
Cashing out your own retirement account to pay the IRS is the intuitive, responsible-feeling response, and it is the expensive one.
Read the exception again. It requires a levy under § 6331, and it requires the levy to be served on the plan. A voluntary withdrawal satisfies neither condition. It does not matter that you used every dollar to pay the exact liability, that a levy was threatened, or that the levy would have landed the following week. The money did not move on account of a levy on the plan, so the 10 percent additional tax applies in full if you are under 59 and a half.
The corollary is stranger and occasionally useful. If a retirement account must be liquidated to resolve the liability, a levy can produce a different tax result, because a qualifying levy distribution is exempt from the 10 percent additional tax. The manual has a procedure for exactly that. Under IRM 5.11.6.3(3), where the taxpayer submits a signed written request for the IRS to levy the retirement account, the officer follows steps one and three but does not make the flagrant conduct determination in step two. That produces a § 6331 levy on the plan, which qualifies for the penalty exception.
Asking to be levied is not a decision to make casually or alone. It is a decision worth understanding before you take the other route by default.
This section covers Social Security and pension income payments, a different levy analysis from the retirement account itself.
Up to 15 percent of each payment, under the continuous levy authority in IRC § 6331(h).
Several categories are excluded from the Federal Payment Levy Program: Supplemental Security Income, lump-sum death and lump-sum claims, dependent children’s benefits, disability insurance payments, and payments already being partially withheld to repay an SSA overpayment. Our page on the Federal Payment Levy Program covers the mechanics.
There is also a systemic exclusion worth knowing about. The IRS uses a Low Income Filter in the Federal Payment Levy Program that generally screens Social Security, military retirement, and Railroad Retirement Board recipients below 250 percent of the Department of Health and Human Services poverty guidelines out of automated levies, subject to program-specific criteria and exclusions.
Before an ordinary levy, the IRS generally must provide the required notice of intent to levy and the notice of the taxpayer’s right to a Collection Due Process hearing. A timely CDP request generally suspends levy action while the hearing, and any resulting Tax Court review, is pending.
| Right | Timing | Authority |
|---|---|---|
| Written notice of intent to levy | No less than 30 days before the levy | IRC 6331(d) |
| Notice of your right to a Collection Due Process hearing | Not less than 30 days before the first levy for the period | IRC 6330(a) |
| Request the CDP hearing, on Form 12153 | Within the 30-day period, measured from the notice date | IRC 6330(a)(3)(B) |
| Petition the Tax Court for review | Within 30 days of the determination | IRC 6330(d)(1) |
The 30 days run from the date printed on the notice, not the date it reached your mailbox. That distinction can cost a taxpayer the right to a CDP hearing. Our page on Letter 1058 and the LT11 final levy notice covers what the notice looks like and what to do with it.
Four situations move the hearing after the levy rather than removing it: a jeopardy finding, a levy on a state tax refund, a disqualified employment tax levy, and a federal contractor levy. Even then, § 6330(f) preserves the hearing within a reasonable time after the levy.
Treasury Regulation § 301.6343-1(b)(4) defines that as the levy leaving an individual unable to pay reasonable basic living expenses. It lists the factors an officer weighs: age and employment status, ability to earn, number of dependents, basic living costs, cost of living in the taxpayer’s area, exempt property available to pay expenses, and extraordinary circumstances such as special education expenses, a medical catastrophe, or a natural disaster.
Two limits on that. The regulation requires good faith and lists falsifying financial information, inflating expenses, and failing to disclose assets as violations. And a release does not prevent a later levy on the same property.
Yes, and for the same reason the IRS can. MCL 205.25(1) lets the state treasurer levy on “all property and rights to property, real and personal, tangible and intangible,” after a 10-day demand period that mirrors the federal rule.
The exemption provision is where it gets interesting. MCL 205.25(5)(a) exempts, for an unpaid tax, “the type of property and the amount of that property as provided in section 6334 of the Internal Revenue Code of 1986.” Michigan adopts the federal exemption list, including the dollar amounts. Since § 6334 does not exempt retirement accounts, neither does Michigan, and the 2026 figures of $11,980 and $5,990 apply to a state levy as well.
There is a genuine irony in the timing. The retirement tax phase-out enacted by PA 4 of 2023 completes in 2026, the first year all birth years can deduct retirement and pension benefits in full under MCL 206.30(10). Michigan finished phasing out its retirement-income tax in 2026 while retaining the ability to levy the account itself.
Two more Michigan points worth knowing. Non-tax debts owed to the state get more protection than tax debts do: under MCL 205.25(5)(b), a non-tax debt is capped by the federal wage garnishment limit at 15 USC 1673, a ceiling that does not apply to unpaid tax. And under MCL 205.25(2) and (3), a plan administrator who refuses to surrender levied property without reasonable cause is personally liable for the amount, plus a penalty equal to 50 percent of it, none of which is credited against your liability. That is usually why your plan administrator will not help you.
Sometimes, and the retirement rules are more forgiving than the general ones.
IRC § 6343(b) permits the IRS to return property wrongfully levied upon. The statute treats property differently from money or sale proceeds: specific property can be returned at any time, while money or sale proceeds must be returned within two years of the levy. A separate deadline, in IRC § 6532(c), governs a wrongful-levy suit in court: two years from the levy, extended by 12 months from the filing of an administrative request or six months from a mailed notice of disallowance, whichever is shorter.
The two-year figure is recent. The Tax Cuts and Jobs Act replaced a nine-month period, applicable to levies made after December 22, 2017, and to earlier levies whose nine-month period had not yet expired on that date.
For retirement accounts specifically, IRC § 6343(f), added by the Bipartisan Budget Act of 2018, lets returned amounts and interest go back into the IRA or employer plan without regard to the contribution limits. The contribution is treated as a rollover, is not counted against the one-rollover-per-year rule, and income tax assessed on the levy distribution is abated if the funds are returned by the due date. Our page on the administrative wrongful levy claim covers the process.
Step one of the IRS analysis is the one you control, and resolving the debt through any of the standard channels usually ends the inquiry before flagrancy is ever assessed.
Yes. A 401(k) is not exempt from levy, and Treasury Regulation § 1.401(a)-13(b)(2) expressly permits the enforcement of a federal tax levy against a plan that otherwise bars alienation. In practice, the IRS levies retirement accounts rarely, because its own manual requires three documented determinations and a Director’s approval first.
Yes. IRAs are listed in the Internal Revenue Manual as retirement vehicles not exempt from levy, and because a taxpayer-owned IRA is generally withdrawable, a present right for the levy to attach generally exists.
No. IRC § 72(t)(2)(A)(vii) excepts distributions made on account of a § 6331 levy on the plan. You still owe ordinary income tax on the distribution, and the IRS sends Letters 3257 and 3258 confirming that the additional tax is not due.
The exception does not apply, and you owe the full 10 percent if you are under 59 and a half. The statute requires an actual levy served on the plan. A voluntary withdrawal, even one made to pay the exact liability under threat of levy, does not qualify.
Not all of it, and often less than people expect. Twenty percent is withheld for federal income tax under IRC § 3405(c) before the IRS receives anything, and the levy reaches only what you have a present right to withdraw. A levy on a $5,000 balance produces $4,000 for the IRS.
No. An administrative levy under IRC § 6331 requires no court involvement. It does require the 30-day notice under § 6331(d), the Collection Due Process notice under § 6330, and, for retirement accounts specifically, approval by the SB/SE Director, Collection Area.
Falling behind does not count on its own. The manual lists thirteen examples, including tax evasion convictions, fraud penalties, pyramiding trust fund taxes, hiding assets, frivolous arguments, and a documented pattern of missed deadlines and broken promises. Automatic enrollment contributions are expressly excluded from being treated as flagrant.
Up to 15 percent of each payment under IRC § 6331(h). Supplemental Security Income, dependent children’s benefits, lump sum death claims, and disability insurance payments are excluded from the automated program, and recipients whose income falls below 250 percent of the federal poverty guidelines are generally screened out, subject to program-specific criteria.
Yes. MCL 205.25(5)(a) adopts the federal § 6334 exemption list for unpaid tax, and retirement accounts are not on it. Michigan finished phasing out the state tax on retirement income in 2026 while retaining the ability to levy the account itself.
Possibly. Wrongfully levied property can be returned at any time, and money within two years of the levy. For retirement accounts, returned funds can go back into the plan without counting against contribution limits, and the tax on the distribution is abated if the money is returned in time.
The people who call us about a retirement account levy are usually not close to the standard the IRS applies. They have a balance, a notice, and a reasonable explanation for how they got here. The manual is written for a different taxpayer.
What needs attention is the clock. The 30-day window on a final notice is the one thing that cannot be recovered later, and the voluntary withdrawal is the one thing that cannot be undone.
Call (248) 262-3400 or request a case review. Ayar Law handles IRS collection defense, levy release, and tax debt resolution from offices in Farmington Hills and Grand Rapids.
This page is general information about federal and Michigan tax collection and is current as of September 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Exemption amounts, penalty figures, and Michigan deduction limits are adjusted annually and change without notice. Internal Revenue Manual procedures bind IRS employees but do not create rights enforceable by taxpayers. Whether any of this applies to your situation depends on facts this page cannot know, and prior results do not predict the outcome of any other matter. Consult a licensed attorney before acting.
