What’s the Difference Between an IRS Levy And an IRS Lien?

The IRS imposes a variety of penalties on delinquent taxpayers who fail to respond to collection efforts. In especially severe situations, the agency may assess liens or levies. Both are problematic for taxpayers, but many struggle to tell the difference.

Keep reading to learn the distinctions between these two IRS actions — and why both are worth avoiding.

Intent Versus Action

The question of IRS levy versus lien ultimately comes down to whether the agency takes collection action. A lien simply represents a claim against property, with the intention of obtaining payment for tax debt. With a levy, however, the IRS actually confiscates property.

Credit Concerns

While a lien may not result in the immediate removal of assets or property, it’s still worth avoiding. With liens, the greater threat is not to your property, but rather, to your relationships with creditors.

When the IRS files a Notice of Federal Tax Lien, it can wreak havoc on your credit report. This, in turn, may make it almost impossible to secure a loan when you need it most. Levies are not matters of public record, so they shouldn’t influence your credit report.

Appealing And Releasing Levies and Liens

Both levies and liens provide options for mitigation. If hit with a Notice of Federal Tax Lien, you have the ability to appeal. Likewise, levies can sometimes be released if the IRS determines that it creates an immediate economic hardship. This process may include filing a claim to have levy proceeds returned.

IRS levy releases can also occur when you pay the amount owed or if you enter into an installment agreement, assuming that its terms don’t allow for an ongoing levy.

If you’re determined to avoid both IRS liens and levies, it’s crucial that you work closely with a tax resolution specialist to get your situation under control. Look to the Highland Tax Group for help every step of the way.