Liens & Levies

When you have an unpaid tax debt, one of the tools the IRS can use to recover the money owed to them is asset seizure – either taking your assets or putting a claim against them. The tools (or terms) that the IRS uses when tapping your assets as collateral are referred to as liens and levies.

A tax lien is a claim against your property that prevents you from selling (or refinancing) until the debt is paid. And indeed when it comes time to sell your house – knowing that there are outstanding taxes due is enough to make any investor or potential buyer go on to the next property.

A tax levy is when the IRS actually seizes the asset itself – such as your house, bank account funds, etc. as compensation for the past-due tax debt.

All the information regarding IRS liens against a house or property can be found in a simple title search. The only way to proceed with the sale or refinance is to have the IRS discharge the property from the lien. Sometimes the IRS will accept the equity on the sale (if there is any) in exchange for discharging the lien.

Those involved in property investments are well aware of tax liens and levies—these are the homes and properties we want to avoid!

Most of the time, the IRS doesn’t actually seize your property via tax levy; instead they use a lien that just makes it very difficult (if not impossible) to refinance or sell the property. As such, in this case the IRS is expecting to get the money owned to them when you go to sell.

What is an IRS Lien?

An IRS lien is like a warning sign from the government when someone hasn’t paid their taxes. It means the IRS claims a right to their property (like a house or car) until they settle the unpaid taxes. This helps the government make sure they get paid before other creditors if the person sells or transfers their property.

Having an IRS lien can affect a person’s credit and make it hard for them to do things with their property until they sort out their tax debt. It’s not the same as the government taking the property right away, but it’s a serious notice that they need to deal with their unpaid taxes.

To get rid of the IRS lien, the person usually has to pay what they owe in taxes, set up a payment plan, or find another solution with the IRS. Once they take care of the tax debt, the lien is lifted, and they can freely deal with their property again.

What is an IRS Levy?

An IRS levy is a more serious step taken by the Internal Revenue Service (IRS) to collect unpaid taxes. Unlike a lien, which is a claim against the taxpayer’s property, a levy involves the actual seizure of the taxpayer’s property or assets to satisfy the tax debt. The IRS can use a levy to take control of bank accounts, wages, or other assets owned by the taxpayer.

Getting to the point of an IRS levy usually involves a series of notices and warnings from the IRS, giving you opportunities to address and resolve the unpaid taxes. It’s a serious step taken by the IRS to collect what is owed. To avoid or release a levy, it’s important for the taxpayer to communicate with the IRS, address the outstanding tax debt, and work out a resolution, such as a payment plan or settlement.

Is a Levy the same as “Asset Seizure”?

An asset seizure by the IRS is essentially the same thing as a levy. Its when the IRS takes possession of your property – a house, car, retirement accounts, cash in a bank account, social security income, etc. due to your unpaid tax debt.

“Levy” is the technical term the IRS uses when they are making a legal seizure of your property in order to satisfy an outstanding debt.

What is the difference between a lien and a levy?

A lien and a levy are tools used by the Internal Revenue Service (IRS) to address the issue of unpaid taxes, but they function in distinct ways.

A lien is essentially a legal claim the IRS places on a taxpayer’s property to secure the government’s interest in the event of unpaid taxes. It serves as a notice to other creditors, informing them that the government has a right to the taxpayer’s property. However, a lien doesn’t involve the direct seizure of assets. Instead, an IRS lien acts as a warning sign, potentially impacting the taxpayer’s credit and limiting property transactions until the tax debt is resolved.

On the other hand, a levy is a more forceful measure taken by the IRS to collect unpaid taxes. Unlike a lien, a levy involves the actual seizure or garnishment of the taxpayer’s assets, such as bank accounts, wages, or other property, to satisfy the outstanding tax debt.

A levy is a more immediate and tangible action, and before resorting to it, the IRS typically sends multiple notices providing the taxpayer with opportunities to address and resolve the unpaid taxes.

To sum that up, while a lien is a claim against the taxpayer’s property, a levy is the active enforcement step where the IRS takes control of specific assets to collect the unpaid taxes. Resolving the underlying tax debt is crucial in both cases to release the lien or stop the levy.

Can the IRS put a lien on your house?

Yes, the IRS can put a lien on your house if you owe substantial back taxes. The lien is a debt collection tool they use in order to get your attention and ultimately to collect the past due taxes owed.

How do liens and levies impact your financial standing?

Something to really consider is that since liens and levies are public records, they could affect other parts of your life. One thing for sure is that they will show up on your credit reports. You don’t want a lien or levy to wreak havoc on your life! You need to deal with it.

The impacts of a lien and a levy on an individual’s financial standing can be significant, although in different ways. A lien, which is a legal claim against a taxpayer’s property, can affect their ability to freely deal with assets, potentially hindering property transactions and impacting their creditworthiness. With a lien on a property, buyers may perceive it as a complication in the sale process. While a lien serves as a warning sign and may pose challenges, it doesn’t involve the immediate seizure of assets.

A levy has a more direct and immediate impact on financial standing, as it entails the actual seizure or garnishment of assets, including bank accounts and wages, to satisfy the outstanding tax debt. A levy can lead to tangible and immediate financial hardships, making it a more forceful measure compared to a lien.

Both a lien and a levy underscore the importance of addressing tax obligations promptly to prevent or resolve these actions and mitigate the financial consequences they may bring. The bottom line is the tax needs to be paid off, plain and simple. If not, it will also affect other property the taxpayer may own.

Here’s how we can help…

Dealing with liens and levies on properties owned can be a stressful experience for anyone. At the law office of Steven N. Klitzner, we have the knowledge and the experience necessary to assist you with your individual tax situation.

Contact us at (305) 564-9199 today to schedule a free and confidential consultation and learn more about how we can assist you with stopping IRS asset seizures or removing liens and levies on your property.