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The IRS possesses the largest collection tools throughout the world, and the two most dreaded are the Tax Lien and the Tax Levy. They are two completely different phases of the IRS collection process, whereas one may tend to use them interchangeably in a conversation. The first step to safeguarding your future, your income, and your home is to know the difference between them.

The government is known as an IRS tax lien, which is a legal claim on property by the government. It occurs by default when the IRS evaluates the amount of taxes you owe, and you default to follow up on this amount after you receive a Notice and Demand of Payment.

• Public Record: A Detention of Federal Tax Lien (NFTL) is a filing that the IRS prepares in the public records that alerts creditors that the government has a first alert on your possessions.
• Credit Financial: Some credit bureaus are no longer reporting tax liens even as they show up in the title searches, which means that the loan can hardly be sold or refinanced.
• Business Impact: A lien will be applied to all current and future business assets, such as those associated with accounts receivable.

A levy is a direct hit in case of a warning shot, which is a lien. A lien tax is a legal seizure of your property in order to pay a tax. A levy is an active seizure of your money or property, unlike a lien, which is passive.

• Bank Levies: The bank account can be frozen by the IRS. The bank should have the amount in its custody for 21 days until it can remit the money to the IRS, and this allows you some time to plead for its release.
• Wage Garnishments: The IRS can seize a major chunk of your wages, and you are only left with a little on an exempt amount of money that would be used on necessities.
• Asset Seizures: The IRS can, in extreme cases, take possession and sell physical assets, e.g., cars or houses.

The first distinction is Claim vs. Seizure. A lien secures the interest of the government in such a way that they will receive money in case you sell an asset; a levy directly takes the asset to pay before the debt.

Table 1.1: Tax Lien vs Tax Levy

The former IRS agents at LeadingTax Group are aware that offense is the best defense. There are legal rights that you have to prevent both liens and levies in case you take a course of action within the stipulated time.

You must have 30 days after you get a Final Notice of Intent to Levy (usually Letter 1058 or LT11) to demand a CDP hearing. The legal filing of this request prevents any further action by the levy until the IRS Office of Appeals processes your case.

In case a lien is the reason why you cannot renew the mortgage of a house to pay the IRS, then you may seek the Subordination of Lien. This enables a second creditor (such as a bank) to step up the queue ahead of the IRS. The Lien Withdrawal eliminates the publicity and is frequently offered via the Fresh Start Program for debts up to 25000.

It is possible to usually prevent a levy by signing an Installment Agreement or an Offer in Compromise (OIC). In case you are unable to pay the debt and would suffer immediate financial distress, you can get Currently Not Collectible (CNC) status, which suspends all collection efforts.

Tax liens and levies are high-stakes enforcement measures, but the road does not end there. Using the Taxpayer Bill of Rights and professional representation, it will be possible to secure your assets and locate a sustainable way to taxes solution.

Yes, but it is rare. The IRS typically requires a court order in an attempt to seize a principal residence and only does so as a last resort in the case of a high amount of equity with no other solution having been arrived at.

You will have to demonstrate that the levy imposes an immediate economic burden or go into a payment plan. After the approval of the IRS, they send you Bank Form 668-D to liberate the money.

An existing lien generally remains until the debt has been paid, or until the Collection Statute Expiration Date (CSED), which is normally 10 years, assuming it is already being assessed, has elapsed.

A levy is an incidental (as with the seizure of bank assets) or recurring (as with the seizure of wages) event. The continuous levies stop as soon as the debt is paid or after 10 years of the statute of limitations.