An Overview of IRS Levies and Liens

The Internal Revenue Service (“IRS”) is the government agency responsible for collecting federal taxes. When taxpayers are unable to pay, the IRS may levy or lien their assets to collect unpaid taxes. In this blog post, I will discuss what levies and liens are, how they are different from each other, and how they can affect taxpayers.

What is a Levy?

A levy is an order from the IRS that requires a third party (such as an employer or bank) to turn over money from a taxpayer’s account in order to pay off unpaid tax debt. The levy typically applies to all income sources, such as: wages, salaries, dividends, bonuses, retirement benefits, Social Security payments, and more. Once the levy is issued by the IRS, it remains in effect until the taxpayer pays the full amount or makes arrangements with the IRS on how to satisfy his or her debt.

What is a Lien?

Generally, a lien is a legal claim against property owned by a taxpayer that was used as collateral when taking out a loan or another credit transaction. With respect to the IRS, when a taxpayer fails to pay his or her federal taxes, the IRS has the right to file a lien against any property owned by the taxpayer. The lien generally gives the IRS first rights over any assets owned by that taxpayer. Unlike levies which focus on income sources such as wages and salary, liens typically focus on tangible assets such as real estate and vehicles.

How Can Levies & Liens Affect Taxpayers?

Levies and liens can have serious consequences for taxpayers who fail to pay their taxes or make arrangements with the IRS on how they will satisfy their debt. Levies can cause hardships by preventing taxpayers from accessing funds needed for everyday living expenses, while liens can prevent taxpayers from selling any property without first paying off their tax debts in full. Taxpayers must act swiftly if they wish to avoid these serious consequences; contacting an experienced tax professional is essential in order to ensure all options are explored prior to being subject to either type of collection action taken by the IRS.

Conclusion

Levies and liens are two powerful tools used by the IRS when collecting federal taxes from taxpayers who have failed to pay certain federal taxes. While levies apply mainly towards income sources like wages and salary, liens typically apply more towards tangible assets such as real estate and vehicles owned by those same taxpayers. Both of these collection methods can have serious financial implications for anyone subject to them. Consequently, it is important for taxpayers who owe back taxes to contact an experienced tax professional in order resolve any outstanding issues with the IRS.

Contact Provident Legal Counsel today to discuss your case and legal options. Schedule a Consultation or call (214) 432-6100.