Tax Liens vs. Tax Levies: What’s the Difference?

It’s a question that we get asked a lot: What’s the difference between tax liens and tax levies? Why are these two the most affective tools in the IRS arsenal? And how can you protect yourself from having this happen to you?

What is a Tax Lien?

The definition of a tax lien is a lien that is placed your property by the government in order to secure the payment of delinquent taxes. After the IRS sends you a bill of how much you owe and you fail to pay the debt, the IRS will the file a Notice of Federal Tax Lien. This alerts your creditors that the government now has a legal claim to all your property.

How will this affect you? The simple answer is all your assets now belong to the government. This includes any business property you may have, as well as any accounts receivable. In addition, a lien will show up on your credit report which could affect any ability you have of getting credit. Even if you file for bankruptcy, your lien could continue. The only way to get rid of a lien is to pay the bill.

What is a Tax Levy?

Unlike a tax lien, which just stakes a claim on your property, a tax levy takes it one step further and takes away your property in order to pay the debt. Like a lien, a levy will come after you fail to pay your delinquent tax bill and you receive a Final Notice of Intent to Levy. You have 30 days to respond to this notice; if you fail to do so, then you can say goodbye to your property.

The big difference between tax lien and tax levy is that a lien just says what’s yours is mine whereas a tax levy actually takes what’s yours away from you. So for example, if there is a lien against your property and you decide to sell your home, that money will go to the IRS. Meanwhile, if you are slapped with a tax levy, then you no longer have a home to call your own.

How the IRS Uses Tax Lien and Tax Levy

The IRS uses these tools in order to pay a debt. If you fail to pay your taxes in a reasonable time, the IRS will then either put a lien or a levy on your property as payment. But there are ways to prevent this from happen. Before the IRS hands you a notice, get a tax lawyer. Contact the Houston tax attorneys at Pro Tax Councel today for a free consultation we can prevent your property from becoming the IRS’.