Whats the difference between an IRS Federal Tax Lien and an IRS Levy?

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Darrin Mish: Just about everyday I get asked the question: “What’s the difference between a lien and a levy?” So I thought that I would go ahead and do this blog post and inform the Internet what the difference between a lien and a levy are. Now, most people use the phrases interchangeably because they both start with an ‘L’, and they’re both four letters long, but they really are quite different, and here’s what the distinction is. An IRS tax lien, also known as a ‘Notice of Federal Tax Lien’, is actually notice to the world that you owe them taxes. It doesn’t have any special seizure potential, in and of itself. It does actually give them the right, or the claim, to seize property later, but the lien is actually just notice to the world that you owe taxes.

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Now interestingly, there’s something actually called the ‘hidden tax lien’. With the ‘hidden tax lien’, as soon as there’s an assessment of tax that you owe the IRS and a notice and a demand are made and you fail to pay the tax what’s known as a ‘hidden statutory lien’ arises in the IRS.

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The IRS actually has claim to all of your property, real and personal, wherever it might be. And that’s kind of esoteric, and it’s not something you really need to know, but I think it’s cool because how often do have something called a ‘hidden lien’? It’s just weird. I guess you have to be a tax geek to really appreciate that.

Anyway, a levy is quite different. A levy is actually a seizure or a  wage garnishment. The IRS cannot levy or seize your property outside of really special circumstances. They can’t seize your property without giving you proper notice. And the proper notice is this: they have to send you certified mail to your last known address, which is usually the last address that you filed a tax return at.

They send a final bill notice of ‘Intent to Levy’ via certified mail to your last known address. They then have to wait 30 days, giving you a right to what is known as a ‘Collection Due Process Hearing’ before they can actually levy or take any of your property.

That request for a ‘Collection Due Process Hearing’ is actually an appeal, and you have 30 days from the date of your notice to go ahead and file that appeal. Now there’s actually something called a ‘mailbox rule’ in IRS law. Basically, if you mail your request for ‘Collection Due Process Hearing’ within the time allotted, mailing is the same as filing.

It has to go certified mail though, that’s a very important distinction. So if you fail to appeal that and most people don’t appeal then the IRS will have the right to levy which means take either your wages or your bank account, or any other property that you own, either real property or personal property, wherever it is.

I have a couple of things that I wanted to point out. Wage levies are continuous in nature, which means that the levy will stay on your wages, unless and until you pay off your tax debt, or you convince them to release the levy sometimes a very hard thing to do. If you have a bank levy, that’s a one time levy. That doesn’t mean they’re only going to do it once; it means that it’s not a continuous levy.

The IRS gets the money in the bank at the time the levy is processed by the bank; actually they get it 21 days later. That 21 days is there to allow you to complain, or to appeal to the IRS, in case, for example, they seize the wrong person’s money so it’s pretty important.

You have 21 days from the date of a bank levy before the bank has to turn the money over to the IRS. Bank levies are usually pretty hard to get your money back in that scenario, but the good news is it’s only a one time thing. So the IRS can file multiple bank levies, but in my experience that’s very rare.

So what have we learned? We learned the difference between a levy and a lien. And we learned that there are two basic types of levy: there’s a wage levy and a bank levy.

Hey, why don’t you go check out my free special report at www.getirshelp.com/specialreport. If that’s not the right address, go to www.getirshelp.com and click on the link for the free special report. It might just solve your IRS problems for good. Thanks.

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