ROTH IRA Levied.

[jacko]

My state revenue dept levied my ROTH IRA for unpaid back taxes. However, they only seized the cash, not the invested security. The seized cash only amounted to $122. So why was the ETF holding not molested and left alone?

[HHM]

Not sure.

[bcohen]

I didn't know IRA's could be levied at all. I thought that those are exempt even outside of bankruptcy.

[jacko]

IRA's can only be levied by a Gov't taxing authority. They are still off limits to all others.

I didn't know IRA's could be levied at all. I thought that those are exempt even outside of bankruptcy.

[despritfreya]

Jacko is correct. Typically taxing authorities have the ability to sieze property without consideration of the normal State allowed exemptions. State and Federal tax codes will provide for their own exemptions (how much $ can be garnished from a paycheck etc.) regardless of any other allowed exemption.

As to why the securities were not taken, my guess is the government chose to take the easiest asset to liquidate - cash. Does that mean it won't come back for the securities. . . Only time will tell.

Des.

[HHM]

My other comment would be is that things have to get pretty out of control for a taxing authority to actually levy assets like IRA's. Typically, levying such assets like IRA's or foreclosing a lien on a primary residence is a tactic of last resort. So, whatever you are going to do, you should probably do it.

[GoingDown]

About the only thing they can't get their hands on is cash hidden in a secret and safe place in your apartment.

Anything else is fair game.

[JackBondLove]

So would the owner get a 1099 form for the distribution?

[HHM]

So would the owner get a 1099 form for the distribution?

Yes. It is a double whammy, the taxing authority gets paid to cover taxes already owed, and gets to hit you with more tax.

[justbroke]

That's what is so devastating about a levy on a tax-deferred retirement account. You get hit with the tax on the amount taken from the fund. Making it even worse, you might even get hit with the 10% penalty on an early distribution. (Since it's treated as a taxable distribution.)

[catleg]

No the 10% penalty is waived if the account is levied.
I have no idea how you're supposed to pay the regular tax due.
Unless they allocate some of the seized funds towards current taxes.

[justbroke]

No the 10% penalty is waived if the account is levied.

Yes, only for an IRS levy. I don't see where, in the IRM, a levy by a State taxing authority is exempted from the 10%. Of course, I'm no tax expert, but I have had to deal with a taxable distribution and I don't remember seeing an exception for any taxing authority other than the IRS.

[treehugger1]

Does the fact that it was a Roth that was levied make any difference? Roth IRAs are -post-tax accounts with only the investment return taxable in the future.

[justbroke]

Does the fact that it was a Roth that was levied make any difference? Roth IRAs are -post-tax accounts with only the investment return taxable in the future.

Yes. If it's "after-tax" dollars, then the only tax would be on any capital gain.

[AngelinaCatHub]

Take it from one who knows and pays. The IRS is only second to the SS of Nazi Germany, in power. Remember though, it is a voluntary system. You don't have to participate, however you don't have to breath either but it helps if you wish to live. 'Hub

IRS sucks