Liens vs. Levies: What’s the Difference?

If you’re reading this blog, odds are you may be going through the unfortunate experience of dealing with a levy or a lien from the IRS.

Anyone who has received a letter or a knock on the door from the IRS knows that tax problems can be extremely stressful. However, when it gets to the point where the IRS is seizing your property or wages, it can be a whole different ball game. That’s why it’s important to know the differences between a lien and a levy and what your options are. Trying to figure this out all on your own not only causes added stress, but can be very risky if you’re not completely informed and educated on IRS policies and language.

Once the IRS has caught on to the fact that you haven’t paid your taxes, which frequently takes months or even years, the situation can quickly escalate into an uphill battle that culminates with an IRS lien on your property and/or bank account levies. What’s the difference, you may be asking. Both are very effective methods of collection by the IRS, and both can be devastating for whoever is on the other end.

A lien, by definition, is the right to keep possession of property belonging to another person until a debt owed by that person is discharged. If a federal tax lien is filed against you, the lien protects the government’s interest in all of your property, which can include real estate, personal property and financial assets.

Before an enforceable tax lien can be filed, three requirements must be met:

·      A valid tax assessment of your liability must be made.

·      The IRS must send you a notice or bill explaining the amount you owe and demanding payment within 60 days of the assessment.

·      You must fail to pay the assessed amount.

It is possible to have a lien released or withdrawn. The best and most obvious choice is by paying your debt in full. In this case, the IRS should release your lien within 30 days of receiving full payment.

If full payment of your tax debt is financially impossible, there are other options. These options include:

·      Discharge of property, which allows property to be sold free of the lien

·      Subordination, which doesn’t remove the lien, but allows for other creditors to move ahead of the IRS

·      Withdrawal, which removes the public notice and assures that the IRS will not compete with other creditors for your property.

A levy is different from a lien.

And believe it or not, dealing with a levy can be much more difficult and stressful than dealing with a lien. A levy is an actual seizure of your property to satisfy a tax debt. Levies can be divided into two categories. The first type are levies directed straight at the taxpayer and covers property owned by the taxpayer, such as a home, car, boat, belongings, etc. The second type are levies directed at third parties, such as banks or institutions that hold money or assets for the taxpayer, such as checking and savings accounts, insurance companies or employers that owe wages to the taxpayer.

The second type of levy, the kind that directly impact your income, can have a devastating domino effect on other payments you may have, such as car payments, house payments, credit cards, etc. Don’t let your tax problems get this far out of your control!

If you are currently in a situation where you have not paid your taxes but the IRS has not yet contacted you, it’s best to deal with the IRS now…before liens or levies are filed and the resulting financial obstacles are created.

If you have received notice of either a lien or a levy, contact me, John Willis, or my law firm today. We are tax professionals who will take on your burden and find the best solution possible so that you can move on with your life without the IRS looming over your head.

Give us a call today at 877-254-4254 and let us help to get you back on track.

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