The Difference between Tax Liens and Tax Levies

Paying your taxes is an obligation that you cannot ignore. There are times when a taxpayer, due to some reasons, will start to default on their tax payment obligations which will bring the law into force.

A tax lien is the federal government’s right to make sure that payment of taxes owed. This allows the federal government to place a secured debt on an individual who has been negligent in paying of tax property. Tax liens will often exist as a result due to the delinquent taxes which can be placed on real property or the individuals personal property.

Ideally a tax lien acts as a mortgage against the property and is applied when the taxpayer makes an attempt to sell off their real or personal property. Once the sale has been completed the IRS can claim a right to the proceeds that come out of the property sale.

A tax lien therefore gives the IRS the right to a legal claim on your property as a security of payment for tax liability. Tax liens do assist the IRS in the collection of taxes owed. This is what makes a tax lien different from a tax levy.

A tax lien is released when a taxpayer obtains a Release of the Notice of Federal Tax Lien. The IRS only releases a tax lien only when the tax has been paid in full or is no longer a legal interest to the IRS.

There are procedures for tax lien releases that are followed by the IRS. In certain situations that qualify for the removal of the tax lien, the IRS will remove the tax lien within a period of 30 days and in this case the taxpayer may receive a copy of the Certificate of Release of Federal Tax Lien.

A tax levy is used by the IRS to seize property to satisfy a tax liability. This type of tax levy is used by the government to impose a collection without get permission from the courts of law.

The IRS uses the tax levy to seize property of the taxpayer, this is usually the taxpayers income and all proceeds in the taxpayer’s bank account.

According to the tax law in the United States, the IRS must issue a Notice of Intent to Levy 30 days prior to imposing the levy. A tax levy has specific restrictions unlike the tax lien which at times the property covered by the tax lien may be exempt from an IRS levy.