Crash Course: The Difference Between an IRS Lien and IRS Levy Explained

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The IRS threatens a variety of consequences for nonpayment of taxes. While penalties and interest may be the first course of action, liens and levies are distinct possibilities for large balances not paid over a long period of time. While these repercussions hold many similarities, they’re quite different in practice, as highlighted below.

Levies Versus Liens

An easy way to think of liens and levies: a lien is essentially a warning. With a levy, however, the IRS takes action.

The IRS defines a lien as ‘a claim against your property to secure payment of your tax debt.’ A lien turns your property into collateral. Liens are typically reserved for real estate. Occasionally, however, the IRS may issue liens against equipment or other forms of property.

With a levy, the federal government actively takes possession of your property. Levies are placed on several types of property, including savings accounts, retirement accounts, employee wages, or accounts receivable. Many people think of levies as garnishments, as they often target liquid assets.

Why You Should Take Both Liens and Levies Seriously

While an IRS lien may not result in the immediate removal of your property, it can still prove devastating. When assessing a lien, the IRS files a Notice of Federal Tax Lien—a public document that can influence your credit score. The goal of this notice is to alert creditors to the federal government’s legal right to your property. Conversely, while a levy could result in the prompt removal of property, no public notice will be filed with creditors. Levies, however, are worth avoiding for obvious reasons: they can result in wage garnishment or withdrawal of funds held in checking, savings, and retirement accounts.

Whether you’re currently dealing with an IRS lien or levy, you can count on Highland Tax Resolution for help. Reach out today at 720-398-6088 to learn more about liens, levies, and possible solutions.