There is nothing scarier than going to your mailbox and seeing a notice of the IRS’s intent to levy you. Owing taxes can be scary enough, but when you add in the stress of being levied or having a lien placed on your property, it can be too much. If you have received notices from the IRS or you have been talking about possible problems with your taxes, you may have come across the terms Tax Levy and Tax Lien. The two are types of collection action used by the IRS to collect on an unpaid tax debt. They have some similarities and they both have stark differences you need to be aware of.A tax lien and a tax levy are both debt collection instruments that allow the IRS to collect property or money to pay off a taxpayer’s delinquent tax debt. How they collect on a levy and a lien differ but they both are used to collect on a tax debt that has not been paid. Before you get levied or have a lien placed, you as a taxpayer will get several letters or notices from the IRS. The IRS will contact you several times before it ever places a lien or levy. You will get a notice such as a CP90 or a CP504 warning you that the IRS is planning to collect on your debt. In the notice, you will see how much the IRS is claiming you owe, what tax year created the balance and what your options are. Options you have as a taxpayer are to either appeal the levy or lien, pay off your tax debt in full, or enter into a payment plan with the IRS.  You can also hire an attorney to help you decide which option is best. You usually have about 30 days to appeal the levy. If you appeal the notice, you will then have a Collections Due Process Hearing.

The difference between a lien and a levy are pretty simple. For example, a Levy is a verb and a Lien is a noun. A lien is a legal claim against your property to secure payment of your tax debt, while a levy takes the property to satisfy the tax debt.

Let’s talk about tax levies first. When talking about a tax levy from the IRS, this “verb” is the very action every taxpayer dreads.  It is the IRS actively taking money directly from your bank account or paycheck.  When a levy has been issued, the IRS now has the ability to seize your property, either your income or assets. A tax levy is a legal seizure of your property to satisfy a tax debt. Tax levies can come in the form of a wage levy, a bank levy or an accounts receivable levy. An IRS wage levy is when the IRS issues a wage garnishment and garnishes a percentage of you wages. In some cases, the IRS may be able to seize 100% of your wages. A bank levy is when the IRS issues a levy to your bank and can seize some or all of the funds currently in your bank account. An accounts receivable levy typically occurs if you are self-employed and targets your customer base. The IRS will send a notice of levy to your customers and they will then have to remand all funds that were to be paid to you, to the IRS. Levies are issued when you are in collections with the IRS.

When talking about a Tax Lien, this “noun” is placed on your property as an “Insurance Policy” for the IRS.  This lien will simply sit there and will only be a problem if you trying to sell that home or property. The IRS does this so if you decide to sell your home or other property, the IRS will be sure to get their cut first! Liens can also be placed on your credit, making it difficult to attain loans or create higher interest rates if a loan is allowed. A Tax Lien can be placed on your account at various times when you’re dealing with a tax issue.  Some liens will appear early in the process of having a balance with the IRS, others are much later, and some are placed after a resolution is in place with the IRS just as another “Insurance Policy” in case the taxpayer defaults on the agreement.

Basically, no one wants to ever have to deal with a levy or a lien from the IRS, but the differences are substantial and it’s important to know what they mean. If you have received letters from the IRS and are worried you could have you bank account levied, call Polston Tax today. Our team of IRS tax attorneys can help keep your money and assets safe. Call us today at 844-841-9857 or click below to schedule a free consultation!