Can the IRS Take Your 401k? And Can New York?

The short answer

Who is collecting matters

There is no single list. What is protected depends on who is collecting, and New York and the IRS do not agree.

Retirement is complicated

Retirement accounts are exempt from a New York money judgment by statute. Against the IRS they are protected by policy, not by law.

NY removes its own protections

When the state is the creditor: your car, the $3,425 exempt deposit floor, and its automatic bank safeguards fall away.

Find out what is at risk

Tell us who is collecting and what you hold, and we will tell you which of it is reachable and which is not. Call (212) 641-0673 or use the contact form. We come back within 24 hours, and we are available evenings and weekends. Confidential, and handled by a CPA or EA, not a call center.

Send the contact form (212) 641-0673

Who is collecting decides

Two collectors, two lists

What is protected depends on who is collecting. A New York State tax warrant and an IRS levy run under different statutes, and an asset out of reach under one can be taken under the other.

The clearest example is a 401(k).

01Can the IRS take your 401(k)?

Can the IRS take your 401(k)?

Yes, as a matter of law, and it takes three steps to get there.

Section 6331 lets the IRS levy on all property and rights to property.
Section 6334 lists what is exempt from that.
Retirement savings are not on the list, and 6334 says nothing outside the list is exempt.

IRS policy protects a 401(k), not the statute. The IRS generally does not levy retirement savings without flagrant conduct, though a written request from the taxpayer can bypass that step.

The National Taxpayer Advocate has pointed out more than once that flagrant conduct is not defined. It appears in neither the Code, the regulations nor internal IRS guidance, and the Advocate has recommended that it be.

So the IRS can take a 401(k). What stops it is a discretionary policy with an undefined trigger, which is not an exemption.

Retirement accounts: the IRS position against the New York position

The IRS: reachable

• Section 6331 reaches all property
• Section 6334 lists the exemptions
• Retirement savings are not listed
Protected by policy, not by law

New York State: out of reach

• CPLR 5205(c) exempts them
• Treated as spendthrift trusts
• A tax warrant is a money judgment
Protected by statute

A discretionary policy with an undefined trigger is not the same as an exemption. New York keeps this protection in place even when the state itself is the creditor.

02New York retirement exemption

Are retirement accounts exempt from a New York tax warrant?

Yes — exemptby statute

Against a New York State money judgment — and a tax warrant is one — retirement accounts are exempt by statute. CPLR 5205(c) treats an IRA, a Keogh, a Section 401 plan and a Section 457 plan as trusts created by someone other than you, which puts them out of reach. It presumes them conclusively to be spendthrift trusts.

Payments coming out of those plans get a full exclusion rather than the ninety percent that applies to other exempt trusts. New York does not switch this protection off when the state is the creditor, unlike the other protections on this list.

Two limits

to that protection

Recent contributions

Money added from ninety days before the claim was brought onward is not exempt.

Voidable transactions

Nor is anything the debtor and creditor law treats as one. Moving money in once the trouble has started does not work.

03Ordinary creditors

Ordinary creditors under CPLR 5205

The same statute answers a related question about lawsuits and credit cards rather than tax.

IRA creditor protection and 401(k) creditor protection in New York come from the same statute as the rest of this list. CPLR 5205 exempts these accounts from any money judgment, not only a tax one.

Against an ordinary creditor the position is stronger still, because the vehicle exemption and the automatic bank protections New York removes for itself generally stay in place.

So retirement accounts protected from creditors in a lawsuit are protected from a New York tax warrant as well. The rest of your list is longer against a private creditor than against the state.

Bank restraint under CPLR 5222

The gap is widest at the bank. Against an ordinary creditor, if the account holds no more than the applicable threshold, New York does more than shield that money.

Against an ordinary creditor at that threshold the statute does two things a shield alone would not:

The account is not restrained and the notice is void.
The bank cannot charge you a fee for a restraint it could not lawfully place.

Against the state, neither applies.

04Removed against the state

Exemptions that do not apply against New York State

The statute writes these exceptions in, so they are not a matter of discretion.

Exemption	Against a private creditor	Against New York State
One motor vehicle, $5,500 above liens	Applies	Removed by CPLR 5205(a)(8)
$3,425 direct deposit floor	Applies	Removed
Void restraint and no bank fee	Applies	Removed
Retirement accounts under CPLR 5205(c)	Applies	Applies
Ninety percent of wages	Applies	Applies

Your car

CPLR 5205 exempts one motor vehicle up to $5,500 above liens, or $13,625 if equipped for a disabled debtor. That exemption does not apply where the state is the creditor.

The bank account floors

Where exempt payments were direct deposited in the previous forty five days, $3,425 is normally protected. Neither that nor the claim machinery applies where New York State is the creditor.

05What people get wrong

Automatic protection against a timely claim

The belief

Exempt property is automatically left alone. If it is on the list, nobody can touch it.

What is true

Against New York State, New York’s claim procedure does not apply, but federal rules still automatically protect two months of certain directly deposited benefits. Against an ordinary creditor, New York adds its own floors and void restraint rules. Other funds still need a timely claim.

Why it costs money. Money outside those automatic protections can still be taken if nobody claims it in time. Recovering it afterwards is slower and harder than protecting it in the first place.

06The rest of the list

The rest of the CPLR 5205 exemption list

CPLR 5205 is a long list and much of it is small.

Wearing apparel, household furniture, one refrigerator, one television, one computer, a cellphone.
A wedding ring, and up to $1,325 of other jewelry and art.
Tools of trade up to $4,075 where they are necessary to your calling.
Ninety percent of earnings for personal services.
Security deposits on your home and your utilities.
Medical and mobility equipment, and a guide or service dog with its food.

Without a homestead claim, $1,325 of personal property, bank account or cash is exempt as well.

Every figure here comes from the Department of Financial Services table effective April 1, 2024. The figures adjust every three years, with the next revision due April 1, 2027.

07FAQ

Exemption questions

Can the IRS take my 401(k)?

As a matter of law, yes. Section 6331 lets the IRS levy on all property, Section 6334 lists what is exempt, and retirement savings are not on that list. What stops it in practice is IRS policy, not a statute.

Are retirement accounts safe from a New York tax warrant?

Yes. CPLR 5205(c) exempts an IRA, a Keogh, a Section 401 plan and a Section 457 plan from any money judgment, and a tax warrant is one. New York does not switch this protection off against itself.

Is my car protected from a New York tax warrant?

No. The vehicle exemption exists, but the same paragraph of CPLR 5205 withdraws it whenever the creditor is New York State, one of its agencies or a municipal corporation.

How much of my wages can New York take?

Ninety percent of earnings for personal services is exempt, so collection reaches up to ten percent. The federal figure works differently and is set by a table rather than a percentage.

Does exempt property get left alone automatically?

Only in part. Two months of certain directly deposited federal benefits are protected without you doing anything. Everything else depends on claiming it in time.

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Before the bank pays it over

Claim it before the bank pays it over

Exempt money outside the automatic bank protections still goes if nobody claims it promptly. If a levy has landed, the useful window is short. Call (212) 641-0673 or send the contact form. No charge for the conversation.