Tax Liens and Levies: Essential Guide

Understanding the difference between tax liens and levies is crucial for taxpayers facing IRS collection actions. This comprehensive guide explains what they are, how they work, and your options for resolution.

What is a Tax Lien?

A federal tax lien is the government's legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government's interest in all your property, including real estate, personal property, and financial assets.

Key Facts About Tax Liens:

• Automatic Filing: The IRS files a Notice of Federal Tax Lien after you owe $10,000 or more in back taxes
• Public Record: Tax liens become part of your credit report and public records
• Property Impact: Liens attach to all property you own or acquire while the lien remains in effect
• Credit Damage: Can significantly impact your credit score and ability to obtain financing

What is a Tax Levy?

A levy is the actual seizure of your property to satisfy a tax debt. Unlike a lien, which is a claim used as security for the tax debt, a levy actually takes the property to satisfy the tax liability.

Types of Levies:

• Bank Account Levy: IRS freezes and seizes funds from your bank accounts
• Wage Garnishment: IRS takes a portion of your wages directly from your employer
• Asset Seizure: IRS can seize and sell your property, including real estate and vehicles
• Business Assets: Seizure of business property, accounts receivable, and other business assets

Timeline and Process

Before a Lien is Filed:

1. IRS assesses the tax and sends a Notice and Demand for Payment
2. You neglect or refuse to fully pay the debt within 10 days
3. IRS files a Notice of Federal Tax Lien

Before a Levy is Issued:

1. IRS sends a Final Notice of Intent to Levy
2. You have 30 days to respond or request a hearing
3. If no response, IRS can proceed with levy action

Your Rights and Options

Lien Release Options:

• Pay in Full: Complete payment releases the lien
• Discharge: Remove lien from specific property
• Subordination: Allow other creditors to move ahead of the tax lien
• Withdrawal: Remove the public Notice of Federal Tax Lien

Levy Release Options:

• Full Payment: Pay the tax debt in full
• Installment Agreement: Set up a payment plan
• Offer in Compromise: Settle for less than the full amount owed
• Currently Not Collectible: Temporary halt due to financial hardship
• Innocent Spouse Relief: Relief for spouses who shouldn't be held liable

Prevention Strategies

The best way to avoid liens and levies is to address tax issues early:

• File all required tax returns, even if you can't pay
• Contact the IRS immediately if you can't pay your taxes
• Consider payment plans or other resolution options
• Seek professional help from qualified tax professionals
• Keep detailed records of all communications with the IRS

How Brevitax Can Help

Our platform connects you with experienced tax professionals who specialize in lien and levy resolution. We can help you:

• Understand your specific situation and options
• Negotiate with the IRS on your behalf
• Set up payment plans or other resolution strategies
• Work to release or withdraw existing liens
• Stop levy actions and protect your assets