Finance

Do You Know the Difference Between an IRS Tax Levy, and an IRS Tax Lien?

Let us explain the difference between an IRS tax levy and an IRS tax lien in this post.

An IRS tax lien is a legal claim against a taxpayer’s property to secure payment of an outstanding tax debt. This means that if a taxpayer fails to pay their taxes, the IRS can file a lien on their property, such as their home, car, or other assets.

The lien serves as a notice to other creditors that the IRS has a claim to the taxpayer’s property. The lien does not necessarily result in the immediate seizure of the property, but it does affect the taxpayer’s ability to sell or transfer the property.

A tax lien can remain in place until the tax debt is paid in full or until the statute of limitations for collecting the debt expires.

An IRS tax levy, on the other hand, is an actual seizure of a taxpayer’s property to satisfy an outstanding tax debt. The IRS can use a levy to seize a taxpayer’s wages, bank accounts, or other assets, including their home or car, in order to satisfy the tax debt.

Unlike a lien, which is a legal claim against a taxpayer’s property, a levy is an actual seizure of the property. Before the IRS can levy a taxpayer’s property, they must provide the taxpayer with notice and an opportunity to contest the proposed levy.

A levy can be lifted if the taxpayer pays the tax debt, enters into a payment plan with the IRS, or successfully appeals the levy.

In summary, an IRS tax lien is a legal claim against a taxpayer’s property to secure payment of an outstanding tax debt, while an IRS tax levy is an actual seizure of the property of the taxpayer to claim the debt.

Both a lien and a levy can have serious consequences for a taxpayer’s financial well-being, so it is important for taxpayers to work with the IRS to resolve their tax debts as soon as possible.