Either you forgot to pay the federal income tax debt, or you refused. You’re now in serious trouble with the IRS. You can’t stop panicking.
It is legal for the United States government, in fact, to collect the tax amount owed via two unusual means: a tax levied or a lien. Unfortunately, these collection activities by the Internal Revenue Service (IRS), could have a negative impact on your finances.
What is the difference between a lien and a levy? How can you protect yourself in case you face either type of legal action. This article will explain the difference between a tax lien and a tax levie, and what tax levie or lien assistance is available.
IRS Tax Levies
It is important to understand the difference between a lien and a levy. This will help you protect your assets as well as your finances. Let’s start by highlighting the basics of tax levies.
Tax levies allow the IRS to take possession of specific assets or properties. This is the last resort for the IRS to collect any tax they still owe. This is basically the same as the garnishment or seizure of your property.
All assets you have may be subject to a levy by the IRS. This includes your retirement accounts, savings, checking, and retirement accounts. Your salaries and wages could be garnished. A levy could also be applied to your house, business equipment, or motor vehicle.
As you consider the differences between a lien or a levy you should also note that the IRS cannot garnish your tools used in your job or most of your household items. The IRS cannot garnish the income sources you require to live during financial difficulties or illness. These include worker’s compensation benefits and unemployment insurance benefits.
IRS Tax Liens
It is important to note the distinction between a lien or a levy when it comes to tax liens. These legal actions place claims on assets that you own and make them collateral in order for your tax debt payment to be secured. Tax liens, which are not tax levies but protect your assets, as well as any assets that you may purchase in the future, are a better option than tax levies. Tax liens are typically applied to real property (buildings), but they can also be applied to equipment used by businesses.
A lien is a public record. This means that they will be published in your local newspaper. A lien is a public record that reveals to anyone who looks at the local newspaper that you have failed to pay taxes. The IRS will then place a lien on your property. Your credit score will be affected by the fact that credit bureaus will also receive reports about your lien.
However, levy notices do not go public. They will not be shared with credit agencies. You will be able to have your income and assets seized. This can have financial consequences.
Similarities Between Tax Levies And Tax Liens
Understanding the differences between a lien and a levy is crucial. It is also important to know their similarities. First, both tax liens, as well as levies, will notify all creditors of the government’s claim on your earnings and property. In some cases, the government may allow creditors who have secured property within the last 45 days to reclaim the property. Other times, they will take priority.
Even though there are some differences between a tax lien and a tax levie, both types must be filed in your state or county of residence. These notices will be filed by the government with your county recorder or clerk of courts.
How To Deal With Tax Levies And Tax Liens
You should understand the differences between a lien and a levy. This is because of the financial damage they can cause. If you are already facing legal action, consult a tax professional for information about your options to reduce or satisfy your IRS tax debt.
If you are unable to pay full tax, you might be able to take advantage of an OIC (offer in compromise). This would allow your debt to be settled, which would reduce your payment and still meet your tax obligation. You could also pursue a “currently non-collectible” status if your financial situation is extreme or if you have experienced another emergency such as the death of a family member or your own disability. This would mean that your debt would not be collectible for a certain period of time (usually one year), but interest and penalties will still accrue.
Assistance With Tax Liens & Levies
Tenina Law can help you with tax levy or tax notices if you have already received one. We can help you understand the differences between a lien and a levy and also select the best method to get your lien or levy removed.
Contact us for more information about a tax lien and tax levies. Also, how tax levy or tax lien can help protect your financial position in the future.
This article was written by Alla Tenina. Alla is one of the best IRS Tax attorneys in Los Angeles California, and the founder of Tenina law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.