Federal Tax Levies & Liens

There is often confusion about the difference between federal tax levies & liens. If you aren’t a tax expert yourself, these terms can feel like they are in a different language. The terms “levy” and “lien” are not interchangeable, but they are closely linked. This article will break down everything you need to know about these important IRS penalties.

Levy vs Lien

levy is when the IRS is able to legally seize your property in order to satisfy a tax debt. However, a levy does not just appear out of thin air without warning. You will receive notice of a lien before the IRS takes action via a levy. A lien refers to the IRS’s legal claim to your property before they implement an actual seizure. This is an important difference, and it is smart to talk to a tax expert upon receiving notice of a lien in order to prevent a levy from being activated. In the simplest of terms, a lien is the IRS’s statement of intention to seize your property. A levy is when the IRS actually implements the seizure process.

What Is a Levy?

A levy is the IRS’s attempt to seize property in order to settle a tax debt. This means the IRS is lawfully entitled to seize your personal property, real estate, cash, bank savings, and any other assets. Even more so, the IRS is also able to initiate a wage levy that forces your employer to garnish a certain amount from your paycheck during each pay period until you have satisfied your debt. In most cases, you will receive a notice of intent to levy approximately 30 days before a levy is initiated. It is essential that you take action upon notification as quickly as possible, you may be able to stop the levy before any harm is done to your finances or credit record by working with a tax expert.

What Is a Lien?

The IRS will notify you of a tax lien if you do not pay your taxes. A lien is considered a “warning” from the IRS. Still, it is not an empty threat, an IRS lien is a public record that states that the IRS can legally claim your property. An IRS Notice of Federal Tax Lien serves the purpose of letting creditors know that the government has a legal right to your property. As a taxpayer, you have the right to appeal a tax lien.

How Long Before a Tax Lien Becomes a Tax Levy?

This is where a document known as the IRS Final Notice of Intent to Levy becomes crucial. A notice will either be mailed to you or delivered in person. The clock is actually already running if you’ve received this letter. However, the IRS is not able to seize your property within 30 days of sending you a notice of final intent. This 30-day period provides you with the opportunity to request a Collection Due Process (CDP) Hearing with the IRS Office of Appeals. However, it is important to note that the levy process may begin once you allow those 30 days to pass without taking action. There are a few exceptions to that 30-day window. For example, the IRS does not need to obey the 30-day window when it comes to levying tax refunds. The IRS may also bypass the 30-day requirement if the collection of a tax amount is in jeopardy.

Getting Help Before a Tax Lien or Levy Becomes a Problem

It is important to get help if you ever find yourself in a situation where you are receiving notice of a lien or a levy. CKH Group can help you, reach out to learn more and schedule a free consultation here.

The above article only intends to provide general financial information and is based on open-source facts, it is not designed to provide specific advice or recommendations for any individual. It does not give personalized tax, financial, or other business and professional advice. Before taking any form of action, you should consult a financial professional who understands your particular situation. CKH Group will not be held liable for any harm/errors/claims arising from the articles. Whilst every effort has been taken to ensure the accuracy of the contents we will not be held accountable for any changes that are beyond our control.

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