How do I protect my retirement accounts from the IRS?

IRS treatment of retirement accounts in collection depends on the context. In standard collection (not during OIC or bankruptcy): the IRS can levy retirement accounts (401(k), IRA, etc.) but rarely does because it triggers the 10% early withdrawal penalty plus income tax, resulting in significant loss. The IRS prefers other collection methods first. In Offer in Compromise calculations: retirement accounts are included in your asset calculation, but the IRS generally applies a discount (using 'quick sale value' of 80% minus taxes and penalties that would be incurred on withdrawal). Some OIC examiners may exclude retirement accounts if you're near retirement age. In installment agreement analysis: the IRS generally does not require you to liquidate retirement accounts to make payments, but they may consider the account as an asset that prevents CNC status. Protective strategies: don't voluntarily withdraw retirement funds to pay tax debt without professional advice (the withdrawal itself creates more taxable income), keep making regular contributions to employer-matched retirement plans (this is considered an allowable expense), and if you're in an OIC negotiation, your representative should argue for maximum exclusion of retirement assets. A skilled tax professional can structure your resolution to protect retirement accounts while satisfying the IRS.