By: Law Office of Ray Haselman

What’s the Difference Between a Levy and a Lien?

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People often confuse the terms ‘tax levy’ and ‘tax lien,’ or they believe the two are one and the same. While the two terms deal with similar topics, they mean markedly different things.

If you believe that you may be at risk of being subjected to either a tax lien or a tax levy by the IRS, it may be pertinent that you speak with a professional tax attorney. A tax lawyer can help guide you through the process of ensuring a successful tax season that does not put your properties at risk or help you after the IRS has already placed a tax lien or levy.

What Is A Tax Lien?

The legal definition of a lien is the government’s (specifically the IRS’s) claim against your property if you fail to pay or neglect your tax debt. The IRS puts a tax lien in place to protect the interest in all property owned by the taxpayer, including real estate, financial investments, and private belongings.

A tax lien is placed after a set of conditions have been met, assuring the IRS that the taxpayer has no intention of paying their debt or has not found the means to do so.

  • The IRS has put a taxpayer’s balance due in the record books.
  • They send a bill to the taxpayer, known as a Notice and Demand for Payment, explaining how much the taxpayer owes.
  • The taxpayer refuses or neglects to pay the bill in the time given by the Notice and Demand for Payment.

What Is A Tax Levy?

Tax liens and levies are similar enough to be confused by lay folk. However, the levy is a later process that the IRS employs to ensure payment of owed taxes.

While the IRS has a tax lien on a property, the taxpayer still owns that property. A levy occurs when the IRS seizes ownership of the property until the taxpayer produces the due taxes. If due taxes are not paid by a taxpayer or arrangements are not a maid to settle the debt before the time the lien has matured, the IRS can place a levy on the property, seize it, and sell it.

The IRS is also entitled to trigger a ‘wage levy,’ more commonly known as a garnishment. This forces a taxpayer’s employer to hold onto a percentage of their wages on each paycheck until the IRS’s debt is satisfied.

When Does a Lien Become a Levy?

A notice of intent to levy is typically given around 30 days before activation. Reaction to the notice is essential during this period.

A document known as the IRS Final Notice of Intent to Levy will be mailed or delivered in person to the taxpayer. The IRS is unable to seize property within 30 days of sending notice. If no action is taken, the IRS can seize the property after that thirty-day window has ended.

If the collection of the tax amount becomes jeopardized, the IRS has ways to legally circumvent the required 30-day window.

What Can You Do To Keep a Lien Or a Levy From Becoming a Problem?

The short answer to the problem is to ensure that proper care is given to your tax books. Pay your taxes properly, with the help of a tax professional, and this does not become an issue.

If you’ve received a Final Notice of Intent to Levy, you need to request a Collection Due Process hearing with the IRS Office of Appeals within your 30-day window.
If you’ve gotten yourself into a situation that is spiraling out of control, you may want to give us a call at 786-522-0410.