Taxes are an integral part of any society, and the Internal Revenue Service (IRS) is the primary body responsible for ensuring that taxpayers fulfill their obligations. Sometimes, however, taxpayers can find themselves unable to pay their taxes on time, which can lead to the IRS placing a lien or a levy on their assets. While both of these actions can have severe consequences for the taxpayer, they are different in nature and should be treated as such. In this blog post, we will discuss the differences between an IRS tax lien and an IRS levy.
An IRS tax lien is a legal claim against a taxpayer’s property to secure payment of the taxes owed. When a taxpayer fails to pay their taxes, the IRS may file a Notice of Federal Tax Lien (NFTL) with the county where the taxpayer’s property is located. The NFTL acts as a public notice that the IRS has a claim against the taxpayer’s property. This lien attaches to all of the taxpayer’s property, including real estate, personal property, and financial assets. Once the lien is filed, it can affect the taxpayer’s credit score and make it challenging to obtain credit, sell property, or secure a loan.
An IRS levy, on the other hand, is a legal seizure of a taxpayer’s property to satisfy a tax debt. Unlike a lien, a levy allows the IRS to take possession of the taxpayer’s property and sell it to pay off the tax debt. The IRS may levy any property that the taxpayer owns or has an interest in, including bank accounts, wages, retirement accounts, and personal property. The IRS must follow specific rules and regulations when levying a taxpayer’s property, and the taxpayer has the right to challenge the levy.
One of the primary differences between a tax lien and a tax levy is that a lien is a claim against a taxpayer’s property, while a levy is a seizure of the property. A lien does not give the IRS the right to take possession of the property, but it does allow the IRS to claim the proceeds of the sale of the property. A levy, on the other hand, gives the IRS the right to take possession of the property and sell it to satisfy the tax debt.
Another significant difference between a lien and a levy is that a lien is a public record, while a levy is not. This means that anyone can access information about a taxpayer’s tax lien, including credit bureaus, potential lenders, and employers. In contrast, a levy is a private matter between the taxpayer and the IRS.
In conclusion, an IRS tax lien and an IRS levy are two different actions that the IRS can take to collect unpaid taxes. A lien is a legal claim against a taxpayer’s property, while a levy is a seizure of the property. While both actions can have severe consequences for the taxpayer, it is essential to understand the differences between them and to seek professional advice to deal with any tax debt issues.