What is the difference between a lien and a levy?

People are often confused about the various collection options available to the IRS and their effect.  A lien is public record filed with the local clerk of courts providing notice that the IRS has a claim to the property (real and personal) of the taxpayer.  While a lien may have negative effects on a taxpayer’s credit report/score, it is not the most potent collection weapon in the IRS’ arsenal.

A levy, on the other hand, is an actual attempt by the IRS to seize your property, such as real estate, personal property, or cash you may have in a bank account.  The IRS will normally send you notice of their intent to levy via certified mail prior to the actual levy.  You will have a short period of time to react to the notice and potentially stop the levy from taking place.

Levies are usually used by the IRS when a taxpayer either fails to respond to repeated attempts at collection, or if the IRS is concerned that particular assets of the taxpayer may soon become unavailable for collection purposes due to sale or other disposition.

An experienced tax practitioner can sometimes get a levy lifted.  A lien, on the other hand, normally remains in place until the underlying tax debt is resolved.  In either case, a quick response is required to deal with IRS liens and levies.

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.