Bill Would Allow IRS to Levy Federal Employees More Easily

A new bill making its way through the legislature would allow the IRS to levy Thrift Savings Plan (TSP) accounts.  A TSP is offered to employees of the federal government as a way to save for retirement and is modeled after the private sector 401(k).  But unlike a 401(k), a TSP has always been safe from IRS levy due to provisions in the original 1986 statute.  If this bill makes it past the Senate and becomes law, which is expected to happen before the end of the year, the IRS will be given an additional arrow in its tax collection quiver.  Federal employees have always been vulnerable to wage garnishment and bank levy if they have delinquent tax accounts, but now their TSP accounts won’t be safe either.  Compared to other taxpayers, civil servants are generally better about paying their taxes (an impressive 96% compliance rate).  However, this new legislation is supposed to result in collection of more than $24 million in revenue over the next 10 years due to the sheer number of present and former federal employees.

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