There are many people who live their lives day to day without ever hearing or caring what the difference is between a tax lien and a tax levy, but these people should be advised that when it comes to taxes, knowledge is power. The difference between the two terms, when used by the Internal Revenue Service, can make a world of difference to anyone who finds themselves with a tax lien or tax levy placed against them.
The two terms are both used by the IRS to describe legal methods they can employ to receive the tax money they are owed by individuals or businesses. While the two terms do denote different actions taken by the IRS, each with their own repercussions, the basic premise of both can be boiled down to means used by the IRS to garner backed taxes.
Tax Liens
First, let’s consider tax liens. Tax liens are liens placed on properties of those who are delinquent in their taxes by the IRS. A tax lien is imposed on a person’s property when the IRS concludes that their liability in receiving backed taxes is jeopardized. The amount of the lean will depend on the amount of the taxes, interests, and penalties owed to the IRS by the individual or company. Tax liens are documents of public record and will have a negative effect on the individual’s ability to borrow in the future. Â
Tax LeviesÂ
Next let us consider tax levies. A tax levy is the most direct way for the IRS to legally recover backed taxes from an individual, and is subsequently a great fear of those who are considered delinquent in their tax payments. A tax levy from the IRs means that the IRS is forcibly taking the money they are owed straight from the bank account of the individual or business that owes the money. Luckily, however, tax levies are uncommon and are the last ditch effort of the IRS, which means that the person who is in danger of having their bank account emptied by the IRS will first be warned repeatedly, usually over the course of several years.