What is the Difference Between IRS Liens and IRS Levies?

Man Looking at ComputerWhen you owe tax money to the federal government, there are certain collection methods that are unique to the IRS. The federal government is permitted to take more extreme measures to collect money than typical debt collectors. These measures can include placing liens and levies on your property. If you are facing an IRS lien or levy, contact a Jacksonville bankruptcy attorney to learn about your options. Liens and levies have different consequences for your financial future.

What is a Federal Tax Lien?

If you fail or neglect to pay a tax debt on time, the federal government can make a legal claim on the property you own. This claim is called a tax lien. Your property basically becomes collateral to insure the debt that you owe the IRS. A lien includes all of your property for the amount of the tax liability. This includes real estate, savings accounts and other personal assets. A lien is publicly recorded and will have a negative impact on your credit report.

For a federal tax lien to be placed on your property, the IRS must file a document called the Notice of Federal Tax Lien. This public document notifies creditors that the federal government has priority rights to your property. It’s also often used to establish priority in bankruptcy proceedings. You do have a right to appeal. Speak with an experienced bankruptcy attorney if other debts are causing you to fall behind on your taxes.

What is an IRS Tax Levy?

If you refuse to pay your taxes or make arrangements to settle a tax debt, the IRS may conclude that a levy is appropriate. A levy is a legal action which gives the government the right to seize your property or assets to satisfy a tax debt. A levy differs from a lien in that the government is actually taking your property, rather than simply holding it as collateral. It’s a last resort method that can be applied to your bank accounts, wages, retirement accounts, real estate and automobiles. A levy is a private action and is not reflected on your credit report. For a levy to be issued, there are three requirements that must be met. First, the IRS must have assessed your taxes and sent you a bill or Notice and Demand for Payment. Second, you have failed or neglected to pay the bill. Third, the IRS must serve you with a Notice of Your Right to a Hearing at least 30 days prior to the levy.

Avoiding a Lien or Levy

The best way to avoid a lien or levy is to be sure to pay your tax debts in a timely manner. An IRS tax lien will be released within 30 days of paying your tax debt in full. When you can’t manage to pay your tax debt in full, you may be able to make arrangements for a payment schedule with the IRS.

Speak with a Jacksonville Bankruptcy Attorney

In certain situations, filing for bankruptcy may help when dealing with debts owed to the IRS. If you’re in over your head, speak with an experienced bankruptcy attorney to see what options you have. The bankruptcy lawyers at Parker & DuFresne in Jacksonville can help you find a solution so you can avoid losing your property over tax debts. Call us today to schedule a consultation at 904-733- 7766.

Sources:
https://www.irs.gov/businesses/small-businesses- self-employed/understanding- a-federal- tax-lien
https://www.irs.gov/pub/irs-pdf/p1468.pdf
https://www.irs.gov/pub/irs-pdf/p1660.pdf
https://www.irs.gov/businesses/small-businesses- self-employed/what- is-a- levy

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