Uncle Sam Could Soon Dip Into Your TSP to Recover Tax Debts

topseller/Shutterstock.com

The Internal Revenue Service will soon be able to dip into federal employees’ retirement savings to recoup delinquent tax debts, with the TSP’s governing board taking steps last week to finalize a 2013 law.

The Federal Retirement Thrift Investment Board issued a proposed rule Friday to implement a bill President Obama signed into law in early 2013 making TSP accounts subject to federal tax levies. Lawmakers who supported the measure said it corrected a loophole that gave federal employees “special treatment” private-sector employees did not receive.

The IRS cannot yet issue levies on current or former federal workers’ TSP accounts, as the rule is not yet final. The rule would require FRTIB to notify enrollees that the agency received a levy and that it will be withdrawing funds from the account to pay off the debt.

The IRS has to have “gone through a number of steps” before dipping into a federal employee’s retirement account, according to Kim Weaver, a TSP spokeswoman. The board then has the full account at its disposal to pay debts owed to the tax agency. The levy must be paid in a one-time sum and cannot come from an account that is not yet vested.

The proposed rule would also allow FRTIB to withdraw from an enrollee’s account if the enrollee is required by federal court to pay criminal restitution. When the agency receives a tax levy or criminal restitution order, it would immediately place a freeze on the enrollee’s account until the payment is made.

The TSP board is requesting comments on its guidance over the next 60 days, and will issue a final rule on a yet to be determined date thereafter.

About 318,000 federal employees and retirees -- not including those who established payment plans -- owed the IRS $3.31 billion in back taxes at the end of fiscal 2013. A Senate panel in May cleared a measure that would fire “seriously” tax delinquent feds, as well as prevent agencies from hiring new workers with outstanding tax debts. The House failed to pass a similar bill last year. 

(Image via topseller/Shutterstock.com)

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

    Download
  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download
  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

    Download
  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.

    Download

When you download a report, your information may be shared with the underwriters of that document.