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Tax Controversy: What’s the Difference Between a Lien and a Levy?

The Internal Revenue Service (IRS) has several collection mechanisms it uses to collect unpaid taxes. Among these are tax liens and tax levies — both of which can hurt a taxpayer. However, understand that liens and levies are fundamentally different. While a lien is a legal claim against your property to secure payment of a tax debt, a levy lets the IRS take the property to satisfy a debt.      

What is a Levy?

A levy is a legal seizure of a taxpayer’s property to satisfy a debt. The IRS may issue a levy if you fail to pay your taxes or you fail to make arrangements to settle your debt. If the IRS determines that a levy is the proper action to take, the Service may levy any property that is yours or that you have an interest in — such as your wages, bank accounts, licenses, rental income, dividends, accounts receivable, and commissions. The IRS may also seize tangible property, including your vehicle, boat, or real estate.                                  

Typically, the IRS will only levy your property if four requirements have been met. These include the following criteria:

  • The IRS assessed the tax and issued a tax bill
  • You neglected or refused to pay the tax
  • The IRS sent you a Final Notice of Intent to Levy
  • The IRS sent you advance notification of Third Party Contact  

The IRS must send you a notice of your right to a hearing at least 30 days before the levy, along with the final notice of intent to levy. An IRS levy may be released if it is causing you to suffer an immediate economic hardship and you cannot meet your basic living expenses. But a levy release does not exempt you from paying the balance of your tax bill. Rather, the IRS will work with you to create a payment plan or take any other necessary steps to pay off your balance.         

What is a Lien?

Not to be confused with a levy, a lien is a legal claim against your property when you have not paid a tax debt. A tax lien protects the government’s interest in your property, but it does not let the government actually take the property. The IRS can issue a lien after it assesses your liability, sends you a Notice and Demand for Payment — and you neglect to pay the debt in full. A lien is released within 30 days after the tax debt has been paid. 

Critically, an IRS lien can impact you in various ways. A lien can attach to your personal property, your real estate, your home, your vehicles, and your business assets. In addition to attaching to all of your assets, it can affect your ability to get credit. A lien may also continue after you have filed for bankruptcy.  

Contact an Experienced New York Tax Attorney 

Being issued an IRS lien or levy can be stressful and overwhelming. In such cases, it’s best to have a skillful tax attorney on your side who can best advise you regarding your rights and options. Offering reliable representation to individual taxpayers, businesses, entrepreneurs, and corporations, Brinen & Associates represents clients for a broad range of tax matters at both the state and federal levels. Call (212) 330-8151 or send us a message to learn more about how we can assist you.

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