IRS Form 668-R: Notice of Levy on Retirement Plans

Form 668-R is the IRS's levy form for retirement plans. It is used to reach 401(k), IRA, pension, and similar retirement benefits. Retirement levies used to be served on Form 668-A or Form 668-W. The IRS now uses Form 668-R as a dedicated retirement-plan levy, and IRM 5.11.2 requires managerial approval for it.

Flagrant Conduct Required

Retirement levies are not routine. Under IRM policy, the IRS is required to show flagrant conduct before levying retirement assets. Flagrant conduct typically means something more than failing to pay, such as tax evasion, failure to pay trust fund taxes while continuing to pay other creditors, pyramiding employment tax liabilities, or filing fraudulent returns. The flagrant conduct requirement is why Form 668-R is rarer than Form 668-A or Form 668-W.

Managerial approval is also required for Form 668-R, and the form must be locally generated rather than issued through the Centralized Case Processing system. These procedural safeguards create friction that reduces mistaken retirement levies, but they do not eliminate them.

What the Levy Reaches

The levy reaches amounts the taxpayer has a current right to receive. For a 401(k) or similar plan while the taxpayer is still employed, the levy generally reaches only amounts the taxpayer could withdraw without a plan-level restriction. For an IRA, the levy can reach the entire balance because the taxpayer has an unrestricted right to withdraw. For a pension already in pay status, the levy reaches the monthly benefit as it becomes payable.

Taxes and penalties on the distribution are a separate problem. A levied retirement withdrawal is generally taxable as ordinary income to the taxpayer, and the 10% early-withdrawal penalty under IRC Section 72(t) does not apply to involuntary distributions due to a levy. The levy itself does not create tax liability on the plan administrator.

Release and Hardship

The release standards under IRC Section 6343 apply to Form 668-R the same way they apply to other levies. Economic hardship, an installment agreement that provides for release, or payment of the balance will support release. Because retirement assets often represent the taxpayer's only remaining meaningful resource, hardship arguments on Form 668-R tend to be stronger than they look.

If a Form 668-R hit your 401(k) or IRA, call us at (813) 229-7100. Retirement levies have procedural angles the IRS sometimes gets wrong, and release is often achievable.