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Tax Lien vs. Tax Levy: What's the Difference?

One important point must be made: The IRS has only its own best interests in mind and will do anything they can to protect those interests. When tax matters get serious, the IRS will file a tax lien or a tax levy against a taxpayer. The terms "tax lien" and "tax levy" are not interchangeable but they are linked. Let's break down what there is to know about these IRS penalties.

tax lien

What is a Lien?

A lien is the government's legal claim against your property when you neglect or fail to pay a tax debt. This document is filed in the public records by the IRS declaring their right and intention to collect on taxes they believe are owed. While a lien is typically considered a "warning" from the IRS, it is far from an empty threat. Most taxpayers who are late on tax payments begin suffering the consequences before the lien notice even arrives in the mail. Interest rates and penalties are applied on the original debt owed - the amount of debt begins to exceed the amount of the original debt. If you receive a lien in the mail, do something about it! It is crucial that you seek professional legal help to avoid the "snowball effect" of tax issues.

What is a Levy?

A levy is the action taken against the lien. It is a legal seizure of your property to satisfy the tax debt. Levies take on many aggressive different forms, such as:

~ Garnishment of wages and income

~ Seizing funds from a bank account or other financial account such as investments, dividends and social security benefits

~ Seizing of state tax refunds

~ Seizure and sale of real estate, property and equipment

~ Accounts Receivable Levies (the IRS requests creditors to send payments directly to the IRS instead of the business)

~ Some tax agencies in certain states can suspend your drivers license, professional licenses and seize your passport

The IRS must provide taxpayers with a written notice before they take action on collecting the debt. However, the IRS does not tell a taxpayer when they are going to levy a bank account or when they will be seizing the account or other assets. Instead, they send various letters and notices, such as Notice LT39, Notice CP90, or Notice CP504, indicating their intention to collect after a specified period of time. The notice period for a levy may only be sent out one time. Once the notice period has passed, the IRS is then in control of what can be done as well as the timing.

The IRS will never call, text or email you these notices! These are written notices only sent via mail to your home. If you ever receive a phone call, text message or email claiming to be the IRS, it is a scam.

tax levy

What to do if you receive an IRS Tax Lien:

If you find yourself facing a tax lien, it is best practice to seek out a licensed Tax Attorney. A Tax Attorney helps to level the playing field when dealing with the Federal State and the IRS - they not only understand the tax law but the procedural framework under which that law is administered. For those who are not well-versed in tax law and their rights as taxpayers, hiring a Tax Attorney to go to battle for you against the IRS and the Federal State is a smart choice.

Whether or not you chose to retain a tax attorney to deal with a state tax lien or with some other state tax issue, we encourage you to speak with a tax attorney to at least get a second opinion on the resolution that you are proposing. Let the attorney give you some input about the potential pitfalls that may arise from that approach.


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