What’s the Difference Between a Tax Lien and a Tax Levy?

The process of paying off tax debts can be confusing. When a taxpayer owes money to the IRS, the government can collect funds in a few different ways. Understanding the difference between an IRS tax lien and a tax levy can protect your rights and help you stay ahead of payments.

So what’s the difference? Below, our experienced Levy & Associates Tax Consultants team members discuss everything you need to know about levies and liens. 

What Is an IRS Tax Lien?

A federal tax lien occurs when taxpayers receive an IRS claim against their property and do not pay it off. After the taxpayer neglects payment, the IRS gains legal rights to their property, including their home, assets, vehicles, and even businesses (if they own one).

What does this mean for you? While you can still live in your home, this legal claim will be on public record and will damage your credit score. Having a tax lien can prevent you from:

●        Receiving loans

●        Buying property

●        Renting property

●        Getting a job

●        Profiting from property sales as all proceeds go toward debt

Paying Off a Federal Tax Lien

If you receive a lien, we advise seeking professional help from our team at Levy & Associates Tax Consultants to resolve your debt. Hiring an attorney can protect your assets. When paying off a federal tax lien, you have a few options:

●        Pay the debt in full

●        Settle with an offer in compromise (if applicable)

●        Keep paying until it expires (typically around ten years)

What Is an IRS Tax Levy?

An IRS tax levy occurs for similar reasons to a tax lien, but rather than just obtaining legal rights, the government seizes the taxpayer’s property or assets. Then the IRS uses the proceeds from the collection to pay off the debt.

Assets are not just limited to physical property. The government can levy:

●        Bank accounts

●        Wages

●        Tax refunds

●        Retirement accounts

●        Accounts receivable

●        Rental income

●        Cash loan values of life insurance policies

●        Commissions

●        Business resources

●        Subcontractor pay

●        Homes

●        Cars

●        Boats

Unlike liens, tax levies are not on public record and do not affect credit scores. However, the process of losing your valuables is often just as challenging to navigate. It is essential to contact an attorney as soon as the government issues a levy to keep your assets protected.

IRS Tax Lien vs. Tax Levy Notices and Appeals

Another critical difference between liens and levies is how the overall process unfolds. 

With a lien, you have a 30-day window to appeal it before it becomes irreversible. At this time, you can request a reconsideration and seek legal help.

With levies, you will receive an Intent to Levy notice with a 30-day warning before seizing your property. You can file an appeal at this time, which will result in a hearing. Then, the government cannot collect assets until the hearing settles the request.

Typically, settlement hearings can help you reach a different debt resolution, such as an installment agreement or an offer-in-compromise.

If you do not appeal within 30 days, the levy becomes permanent. Moving forward, you cannot regain your assets.

Preventing Tax Liens and Levies

Both tax liens and levies have serious consequences. It is life-changing to lose something as valuable as your home, and destroying your credit can be just as detrimental. So how can you prevent this from occurring?

●        Pay in full. Pay off your total debt amount as soon as possible.

●        Pay what you can. If you can’t pay in full, seek monthly payment options and deadline exceptions.

●        Settle debts. Consider settling the debt for less. There are a few different options here that you may be eligible for, like an offer-in-compromise.

Resolving Your Debt

Learning the differences between an IRS tax lien and a tax levy can help you understand how to navigate these procedures properly. We recommend seeking legal help to protect your assets and resolve your debt. An attorney can make understanding all of the legal implications surrounding these processes more manageable.

Our team at Levy & Associates Tax Consultants has over 20 years of experience in navigating IRS debt resolutions. We will analyze your case and develop a plan of action to resolve your debt and help you prevent a recurrence.

If you need help, please schedule an appointment with a Levy & Associates team member today by calling us at 800-TAX-LEVY. 

Contact Levy & Associates for Dependable Tax Audit Services

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.

Related Tax Audit Blog Posts

Do Tax Liens Expire?

The process of paying off tax debts can be confusing. When a taxpayer owes money [...]
Read More

Will The IRS Take My Refund for Child Support?

The process of paying off tax debts can be confusing. When a taxpayer owes money [...]
Read More

What’s the Difference Between a Tax Lien and a Tax Levy?

The process of paying off tax debts can be confusing. When a taxpayer owes money [...]
Read More