Opening a letter from the IRS is never a pleasant experience. If you recently looked at an official notice and spotted the words “lien” or “levy,” it is completely normal to feel a spike of anxiety. These two terms sound almost identical, yet they mean very different things for your finances. One is a formal warning. The other can drain your bank account or freeze your income within days. If you are weighing your next move, a short conversation with a Michigan tax attorney can help you identify exactly which notice you are holding and how much time you have to respond.
The easiest way to understand the difference between an IRS tax lien vs. tax levy in Michigan is this. A federal tax lien is a legal claim against what you own. A tax levy is the actual seizure of those assets. A lien secures the government’s position in line. A levy is the government stepping out of line to take what is yours.
If you live in Michigan or Florida and have received a CP504 notice, an LT11 letter, or a Notice of Federal Tax Lien, this guide breaks down what you are facing, which scenario is worse, and the concrete steps you can take right now to protect your property.
A federal tax lien is the government’s legal claim against your property when you owe back taxes and have not paid them. A lien is not a seizure. Think of it as a public marker. It tells lenders, buyers, and other creditors that the IRS holds a priority right to your assets if you try to sell them or borrow against them.
A lien arises automatically once three conditions are met:
At that exact moment, a statutory lien exists, even before any public paperwork reaches your county records. This is sometimes called a “silent” lien because the public never sees it yet. To protect its priority against other creditors, the IRS will then file a Notice of Federal Tax Lien, often shortened to NFTL. Once that notice becomes public record, it surfaces during title searches, loan underwriting, and business due diligence.
There is a common myth worth clearing up. Since 2018, the three major consumer credit bureaus stopped including tax liens on standard credit reports. That does not mean a lien is harmless. The public NFTL is still easy for mortgage lenders, title companies, and commercial underwriters to find, and it attaches to nearly everything you own, including real estate, vehicles, and business assets. A lien can quietly block a home sale, stall a refinance, or freeze a line of credit at the worst possible time.
An IRS tax levy is the actual taking of your money or property to satisfy a tax debt. This is the enforcement action taxpayers dread the most, and for good reason.
Unlike a lien, which simply sits on your title or record, a levy is active and immediate. The IRS can issue a bank levy, which orders your financial institution to freeze the funds in your account. Federal law requires the bank to hold those funds for 21 days before sending them to the IRS. That 21-day holding period is not a courtesy. It is a narrow window to arrange a release before the money is gone.
The government can also reach your paycheck through a wage garnishment. A wage levy is continuous. Once your employer receives the order, a large portion of every check is sent straight to the IRS, pay period after pay period, until the debt is satisfied or your representative secures a release. Only a small amount tied to your standard deduction and exemptions is protected, and the rest can be taken.
Beyond bank accounts and wages, the IRS can levy other assets, including:
In short, a lien protects the government’s place in line. A levy is the government reaching into your wallet to collect.
If you want a fast way to keep the two straight, hold onto this:
A lien is a claim. It establishes that you owe money and secures the government’s right to your assets.
A levy is a taking. It is the execution of that claim, which results in the actual collection of your funds or property.
A lien restricts your financial freedom and clouds the title to what you own. A levy bypasses all of that and reaches straight for your cash. A lien can sit in place for years while you weigh your options. A levy moves fast, sometimes emptying an account within days of the freeze.
From a day-to-day survival standpoint, a levy is clearly worse in the short term. A lien is frustrating because it narrows your options. A levy disrupts your life. Losing access to your cash or a chunk of your weekly paycheck can leave you unable to make rent, buy groceries, cover payroll, or pay basic household bills overnight.
Even so, you should never ignore a lien. A lien is almost always the step that comes before a levy. If you take action while you are still at the lien stage, you have more leverage, more time to negotiate, and a far better chance of protecting your property. Once a levy is active, you are forced into emergency damage control.
The goal is simple. Respond at the lien stage so your case never escalates to a levy.
The IRS rarely springs a levy on you without warning. The agency is required to send a sequence of notices, and the specific letter in your hand tells you how much time is left on the clock.
A CP504 is a notice of intent to levy. It commonly warns that the IRS plans to seize your state tax refund and signals that collection is escalating. On its own, a CP504 does not grant you a formal hearing right, and it is not the final notice before a bank or wage levy. It is a serious red flag, not the last one.
The LT11 letter, also issued as Letter 1058, is the Final Notice of Intent to Levy and Notice of Your Right to a Hearing. This is the most important letter you can receive. The moment it is issued, a strict 30-day countdown begins. The IRS may also send a CP90 or CP297 as a version of this final notice.
The NFTL is the public filing that alerts creditors and financial institutions that the government holds a legal claim against your property. It is the document that turns a silent statutory lien into a public one.
Once the LT11 or Letter 1058 arrives, you have exactly 30 calendar days to request a Collection Due Process hearing, known as a CDP hearing, under Internal Revenue Code section 6330. Filing that request on Form 12153 within the 30-day window does two powerful things. It pauses levy action, and it preserves your right to have the U.S. Tax Court review the outcome. Miss the 30 days, and you may still get an equivalent hearing, but you lose the automatic hold on collection and the Tax Court backstop. Missing this deadline is one of the costliest mistakes a taxpayer can make.
A levy is not always the end of the story. There are several recognized ways to stop one or get it released, including:
Speed matters at this stage. The sooner a release is requested, the better the chance of recovering frozen funds before they leave your account.
A lien is also not permanent. Depending on your situation, there are three main paths to relief:
Choosing the right option depends on your goal, whether that is selling, refinancing, or clearing your record entirely.
Federal tax rules are identical across the country. State collection, on the other hand, is highly local.
In Michigan, the state runs its own collection through the Michigan Department of Treasury. For 2026, Michigan’s individual income tax rate is 4.25 percent, and the state sales tax rate is 6 percent. Under Michigan law, the state generally has six years from the date of assessment to collect an outstanding tax debt, a notably shorter window than the federal 10-year period. A Michigan state tax lien runs for seven years and can be renewed for another seven under MCL 205.29. Just as important, settling your federal IRS debt does not erase a Michigan state debt. The state operates an entirely separate system, with its own rules and its own offer in compromise program.
Florida works very differently. Florida has no state individual income tax, so residents do not face a state-level income tax lien or levy. The Florida Department of Revenue does actively manage sales and corporate taxes, and a business that falls behind on those obligations can absolutely face state liens or levies. If you are a Florida resident dealing with a personal income tax problem, your issue is strictly federal. A local Florida tax attorney can confirm whether your matter is federal, state, or both.
Working with a team that understands both the federal and the state collection systems keeps these separate tracks from getting tangled together.
Consider a small business owner in Oakland County who fell behind on his federal payroll taxes. He received a CP504 notice in the mail, but feeling overwhelmed, he set it aside and kept working. A few weeks later, an LT11 letter arrived. Again he chose to wait, hoping business would pick up.
On the 31st day after that final notice, the IRS moved. It levied his business bank account and started a garnishment against his personal wages.
By the time he reached out for help, his 30-day window to request a CDP hearing had already closed. Resolution was still possible, but his options were far more limited, and the process took much longer than it would have if he had acted on the first notice. In tax resolution, timing really is everything.
The example above is illustrative only and does not describe an actual client. Prior results do not guarantee a similar outcome.
The team at Levy & Associates is made up of dedicated tax attorneys, CPAs, enrolled agents, and former IRS revenue officers. Because several of our staff spent years managing collection cases from inside the IRS, we understand from experience how liens and levies are issued, how they can be released, and where the strategic openings are.
We can step in to:
Historically, the IRS accepts roughly 30 to 40 percent of submitted offers in compromise. Acceptance is never guaranteed, but the option deserves a careful, professional review. Please note that we focus exclusively on civil tax resolution and do not represent clients in any criminal tax matters.
The sooner you act, the more options we have to protect your financial well-being.
A lien is a legal claim filed against your property to secure an unpaid tax debt. A levy is the actual seizure and removal of your money or property to pay that debt. A lien is a formal warning. A levy is an active collection.
A levy is usually worse in the short term because it strips away your actual cash, bank funds, or wages right away. A lien is a longer-term problem that clouds your property and restricts your ability to sell or borrow, and it serves as a warning that a levy may be coming.
Under Internal Revenue Code section 6502, the IRS generally has 10 years from the date of assessment to collect. Michigan’s state collection period is shorter, generally six years from assessment. Certain actions, such as a pending appeal or offer, can pause or extend the federal clock.
You have exactly 30 calendar days from the date on your LT11 or Letter 1058 to request a Collection Due Process hearing. Filing within that window halts collection and protects your bank accounts and wages while a resolution is worked out.
No. Your Michigan state tax debt is separate and is handled by the Michigan Department of Treasury. The state has its own collection rules and its own offer in compromise program, so each obligation has to be resolved on its own.
Since 2018, the major consumer credit bureaus no longer list tax liens on standard credit reports. The public Notice of Federal Tax Lien is still easy for mortgage lenders, title companies, and underwriters to find, so it can still block a sale, refinance, or new loan.
If you have received a tax lien or levy notice in Michigan or Florida, you do not have to handle it alone. The team at Levy & Associates is ready to step in and guide you through the process. Our professionals know the system from the inside because many of us once worked the IRS side of these exact cases.
Call us today at (877) 500-4930 or contact us online to schedule your free consultation.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.