The Difference Between a Tax Lien and Tax Levy
Unpaid tax debt is a very serious issue that the IRS is not likely to ignore. If you are unable to pay this debt and do not communicate with the IRS for an extended period of time, you could end up the recipient of a tax lien or tax levy. If you find yourself in a situation where a lien or levy is imminent, you should understand the difference and make a plan to pay your debt back to restore your credit and get this behind you once and for all.
What is a Tax Lien?
A tax lien is the government’s claim over your property if you have failed to pay tax debt. The IRS can claim your property (houses, cars, etc.) as security (or collateral) for your significant debt. A tax lien can have an extremely negative impact on your credit and show up in public records. This can be more than a blemish and can even stay on your credit report indefinitely, or until you pay off the debt in full. A tax lien should not take you by surprise as the IRS is required to notify you of the tax debt that you owe before they impose a levy. The best thing to do is not to ignore these initial notices from the IRS.
What is a Tax Levy?
When the IRS doesn’t seize property, they may instead choose to issue a tax levy. When this happens, the IRS takes control of some or all of your liquid assets. This usually means they will seize the funds in your bank account. The IRS can make contact with your employer and tax funds directly from your paycheck. This can be incredibly disruptive and financially devastating as you have very little control of what happens to your money once the IRS has taken this last resort measure.
The Bottom Line: What You Can Do If You Are Subject to a Levy or Lien
If you receive written notification from the IRS about your unpaid tax debt, take note. While it might take some time, the IRS will make good on its promises to collect these funds from you. Your best bet is to take charge of your tax situation as early in the process as possible. Paying your tax debt in full is always the best and fastest way to get out of the line of fire, but if this is untenable, you may also be able to negotiate with the IRS, especially if you initiate contact early in the process. You can request to make payments each month (installment agreement) or if you are unable to pay the full amount, you may qualify for an Offer in Compromise, which allows you to pay less than you owe.
Contact Success Tax Relief For Help
If you have questions about a tax levy, a tax lien or would like help navigating this complicated process, Success Tax Relief may be able to help sort it out for you. Give us a call at 1-877-958-6638 and let us review your tax situation to help you come up with a solution that works—once and for all!