What is a 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. A federal tax lien exists after the IRS:
- 1. Puts your balance due on the books (assesses your liability);
- 2. Sends you a bill that explains how much you owe (Notice and Demand for Payment); and
- 1. Neglect or refuse to fully pay the debt in time.
- 2. The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property. For more information, refer to Publication 594, The IRS Collection Process (PDF).
What is a levy?
A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.
If you do not pay your taxes (or make arrangements to settle your debt), the IRS may seize and sell any type of real or personal property that you own or have an interest in. For instance,
- 1. The IRS could seize and sell property that you hold (such as your car, boat, or house), or
- 2. The IRS could levy property that is yours but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions).
The IRS usually levy only after these three requirements are met:
- 1. The IRS assessed the tax and sent you a Notice and Demand for Payment;
- 2. You neglected or refused to pay the tax; and
- 3. The IRS sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy.
The IRS may give you this notice in person, leave it at your home or your usual place of business, or send it to your last known address by certified or registered mail, return receipt requested.
Our office has successfully handled numerous liens and levies. Don’t delay in calling us if you have a tax levy or tax lien. We can help by securing a temporary freeze on further collection activity, giving us sufficient time to analyze your situation and determine the best course of action.