Even though retirement accounts are protected from creditors, the IRS is an exception. The general rule is that if you can get it the IRS can get it too.
Many clients come to me who have been forced to live off of their retirement accounts because of being laid off. When they get the tax bill for the taxes owed and the 10% early distribution penalty, they have no way to pay the amount owed. If your only source of money is taking distributions from money still available in your retirement accounts, the IRS will expect you to liquidate the account to pay off the taxes.
However, many retirement plans deny you access to your retirement funds until you retire or take a job with another company. The IRS cannot force you to terminate your employment. As long as you stay employed the IRS cannot have access to your retirement account. In this case the IRS will look at your wages and other personal assets to pay your back taxes owed.
Scott Allen E. A. Tax Debt Advisors, Inc taxdebtadvisors.com