By Mike Miles
November 24th, 2009 | Uncategorized
Q: Due to some less-than-intelligent decisions I made 10 years ago, I have a tax bill with the IRS for over $100,000. The only asset I have that would enable me to pay this bill is my Thrift Savings Plan. The IRS has put a levy on my wages and won’t discuss an offer in compromise because I have $280,000 in my TSP. I am 58 years old and didn’t plan on retiring until I turned 60. Can I liquidate my TSP, transfer the funds directly to a tax-deferred IRA and avoid the tax bite, but still liquidate enough funds to pay my tax bill?
A: You can only access your TSP account assets while still in service through an age-based in-service withdrawal (if you’re 59 1/2 or older), a hardship withdrawal or a loan. It doesn’t sound like a loan will meet your needs. In the case of either of the in-service withdrawal options, if you qualify, you’ll have to pay tax, and possibly penalty, on whatever money you withdraw and don’t roll over to an IRA or other qualified retirement plan account.