The Difference Between an IRS Lien and a Levy

Those who owe large amounts of money to the IRS may face a variety of actions from the IRS if they do not take steps to resolve their debt. Among the various actions the IRS may take, liens and levies are common methods. These terms are easily confused, and it is important for those dealing with the IRS to understand the terminology. A better understanding of liens and levies may also help a client when discussing options with their tax attorney.

A Lien

If a person owes a large sum to the IRS, the IRS may enforce payment by placing a lien on a person’s property. The IRS has the right to place liens on any current property and may include future property acquired while the lien is active. Liens can be thought of as warnings from the IRS. They let taxpayers and creditors know that if taxes continue unpaid, the property may be seized by the IRS as payment for the debt. Most liens don’t affect the taxpayer directly, although they may severely limit the person’s ability to obtain credit or sell the property.

A Levy

A levy is more serious than a lien. A levy is the actual seizure of property or assets in order to collect on tax debt. Any form of asset seizure such as bank accounts, investments or real property is considered a levy. The IRS typically sends may warnings about impeding levies to give taxpayers ample time to consider a payment plan or some other option. Typically, the IRS does not want to issue levies, and they are a last resort effort to collect on tax debt.


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