Tax lingo doesn’t come naturally to people who don’t work for the IRS. That’s one of the reasons why there’s some confusion regarding the difference between a levy and lien. The two terms are not interchangeable. However, they are linked. Let’s break down what there is to know about these IRS penalties that should never be ignored!

Levy vs Lien

A levy refers to the legal seizure of your property by the IRS to satisfy your tax debt. However, a levy does not simply come out of nowhere without warning. You will be notified of a lien prior to a levy being activated. A tax lien is the IRS’s legal claim to your property that precedes an actual seizure. This is an important distinction because it’s wise to consult with a tax professional after a lien has been initiated to try to prevent a levy from being activated. The easiest way to look at it is that a lien refers to the IRS’s statement of intention for seizing your property. A levy is the actual seizure process.

What Is a Levy?

A levy is the IRS’s attempt to seize property to satisfy what you owe in unpaid taxes. The IRS is lawfully entitled to seize your personal property, real estate, cash, bank savings, and other assets. What’s more, the IRS can also activate a wage levy (garnishment) that forces your employer to hold back a certain percentage of your pay each pay period until your debt is satisfied.

Typically, you will receive a notice of intent to levy about 30 days prior to a levy being initiated. This is a very crucial period for reacting. You may be able to stop a levy in its tracks before harm is done to your finances or credit record by working with a tax professional to obtain a relief option.

What Is a Lien?

The IRS will notify you of a tax lien if you do not pay a tax bill after the agency assesses a tax against you. A lien is considered a “warning” from the IRS. However, it is far from an empty threat. An IRS lien is a public record that provides notice of the IRS’s claim to your property. An IRS Notice of Federal Tax Lien serves the purpose of alerting creditors to the fact that the government has a legal right to your property. As a taxpayer, you do have the right to appeal a tax lien.

What Is the Difference Between a Levy and a Lien?

A lien is a legal claim on the part of the IRS against your property. The IRS is asserting its claim to your property because you’ve failed to pay a tax debt. By contrast, a levy is the actual legal seizure of your property to satisfy the tax debt that you owe. A tax lien will precede a tax levy.

How Long Before a Tax Lien Becomes a Tax Levy?

This is where a document known as the IRS Final Notice of Intent to Levy is going to become crucial. A notice will either be mailed to you or delivered in person. The clock is actually already ticking loudly if you’ve received this letter. The IRS cannot seize your property within 30 days of sending you a notice of final intent. This 30-day window provides you with an opportunity to request a Collection Due Process (CDP) hearing with the IRS Office of Appeals. Unfortunately, the levy process may begin if you allow that 30-day window to come and go without action. There are some exceptions to that 30-day window. For instance, the IRS does not need to obey the 30-day window when it comes to levying your tax refund(s). The IRS may also circumvent the 30-day requirement if collection of a tax amount is in jeopardy.

Getting Help Before a Tax Lien or Levy Becomes a Problem

Looking at tax lien vs tax levy shows taxpayers that these two tax terms are not interchangeable. The one thing that a levy and lien do have in common is that no taxpayer wants to deal with either issue. That’s where Tax Group Center can come in to help you avoid the “snowball” effect that can occur once you receive a lien notice. It could take anywhere from a few days to a few months before the IRS tracks you down with a lien notice after assessing that you owe taxes. However, the truth is that most taxpayers who are late on tax payments begin suffering the consequences before a lien notice ever arrives. That’s because interest rates and late-payment penalties can begin accruing the moment you miss the tax-day payment deadline.

At Tax Group Center, we’re able to help you address or appeal liens and levies using the IRS’s own language. Our team of licensed tax professionals, lawyers, and accountants has been helping taxpayers understand their options regarding late tax payments for 30 years. Let us help you explore options for penalty relief or forgiveness if you have concerns about a lien or levy stemming from unpaid taxes. We can also assist you if you believe that an action has been improperly applied to your account. Call our office today for a consultation.