For the next few weeks, we’re running a “Slice of Life” series where we address real-life problems our clients bring us after they’ve filed their taxes (or not). You can read Part 1 – Slice of Life: I’ve Been Scammed!, Part 2 – Slice of Life: I Hate Filing Quarterly, and Part 3 – Slice of Life: I’m Running Scared of the series.
SLICE OF LIFE #4: A client calls us and asks, “What’s the difference between a levy and a lien?”
What’s usually happened is that this client has received a scary notice from the IRS and needs to know what is going on.
A lien and a levy are two different ways the IRS can use to force you to pay back taxes. Usually, the lien is the first step – if the process needs to be escalated, the levy comes next.
What’s a lien?
A lien is basically a mortgage. When the IRS files a lien against your property, they are formally laying claim to your assets, so if you try to sell your home or land, the money will go to the IRS instead of to you. (This is usually the first panicked phone call we get.) The lien formally notifies any potential buyers that they are to pay some or all of the amount directly to the IRS.
In order to get the lien lifted, you need to pay your tax debt. (Or talk to us, so we can make an offer in compromise or get the debt moved to Currently Not Collectible status.) Once the debt is retired, it usually takes 30-60 days for the lien to be removed, at which point you can sell your assets whenever you like.
However, if you don’t make any arrangements to pay the debt – if you ignore the lien – then the IRS steps up its game and introduces a levy.
What’s a levy?
When the IRS levies your bank account or wages, it actually seizes your money in order to pay your tax debt. The government may take the balance out of your bank account, or garnish your salary each paycheck period, and put that money towards the amount of taxes you owe until the debt is retired.
A levy is a last resort. If you are working with the IRS (and with us) to make payment arrangements, you should not have to worry about having your assets seized. The IRS will contact you multiple times in an effort to resolve the issue. If you don’t respond to any of these communications, you’re much more likely to end up with a lien or, ultimately, a levy. And you don’t want that.
Remember, we can help you get these issues resolved and get a payment plan in place so the situation doesn’t get this serious. The sooner you get in touch with us, the better.
If you have questions about liens or levies – or if you’ve received some unsettling mail from the IRS – give us a call at 844-841-9857, or schedule a free consultation here.
Sales tax is paid to a local or state governing body for the sale of certain services and goods. In Oklahoma, the state sales tax is 4.5%, which is charged on sales of certain services and tangible personal property. Along with the state sales tax, local sales taxes and special district taxes may apply. Business owners...
If you have been struggling to pay the bills or your taxes, you may receive a notice that a garnishment or levy has been placed on your wages or bank account. Even if you make every effort to pay your back taxes, your circumstances may make paying your taxes difficult, such as a job loss...
There are a few different Internal Revenue Service (IRS) professionals, including revenue officers and revenue agents. If you owe back taxes or you’re facing a tax audit, you may work closely with an IRS revenue officer or revenue agent. We cover the differences and similarities between these IRS tax professionals to help you understand who...
Have you received a notice from the IRS informing you that you owe more in taxes? These “30-day letters” can result from an audit, underpaying your taxes when filing a return or many other reasons. While receiving one of these notices can be unsettling, it doesn’t necessarily mean you have to pay the amount the...
If you can’t pay your taxes this year, you may be worrying about what you should do. First, you should know that you’re not alone. Millions of taxpayers struggle with taxes each year and need help. The good news is there is help available. The IRS will work with you and provide options for paying...
According to study results, the majority of Americans dread taxes. One of the reasons why most people get stressed at the mere thought of taxes is because the tax code is so intricate. The other is the legal/financial ramifications that can result from misreporting your income. Whether you’re an individual in need of tax relief, a...