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Difference Between Tax Levies and Tax Liens

tax levies and tax liens

What is a Tax Levy?

A tax levy is a legal seizure of your property or assets by a tax authority, typically the IRS, to satisfy unpaid tax debt. Key points about tax levies include:

  • Enforced Collection: A tax levy is the enforcement of tax collection, where the taxing authority takes direct action to claim the owed tax amount.
  • Assets at Risk: Assets that can be subjected to levies include bank accounts, wages, retirement accounts, real estate, and even personal property.
  • Notice Requirements: Before initiating a tax levy, the IRS must issue a Notice of Intent to Levy, providing the taxpayer with an opportunity to respond or appeal.

What is a Tax Lien?

A tax lien, on the other hand, is a legal claim or encumbrance placed on a taxpayer’s property to secure the payment of a tax debt. Key insights into tax liens are:

  • Asset Security: Tax liens serve as a security interest for the government. They don’t involve immediate asset seizure but establish the government’s claim to your property.
  • Credit Impact: A tax lien can significantly impact your credit score and financial reputation, potentially making it challenging to secure loans or credit.
  • Public Record: Tax liens become a matter of public record, which means they can be accessed by creditors, potential employers, and anyone conducting a background check.

Tax Levies vs. Tax Liens

Understanding these distinctions is crucial, as it can significantly impact how you address and navigate tax-related challenges. So, let’s break down the primary differences between tax levies and tax liens, illuminating the nature of the action, the timing of these actions, and their impact on your assets and financial well-being.

Nature of Action

Tax Levies: Direct Seizure vs. Collateral Claim

At the heart of the disparity between tax levies and tax liens lies the nature of the action they represent:

  • Tax Levies: A tax levy signifies the direct seizure of assets to satisfy a tax debt. It’s an assertive move by the taxing authority, often the IRS, to claim the owed tax amount. This seizure can encompass various assets, including bank accounts, wages, retirement accounts, real estate, and even personal property.

  • Tax Liens: Conversely, a tax lien is not an immediate asset seizure. Instead, it represents a legal claim or encumbrance placed on a taxpayer’s property to secure the payment of a tax debt. Think of it as a collateral claim, where the government establishes its interest in your property without taking it from you.

Timing of Action

Tax Levies: Post-Debt Enforcement vs. Preemptive Measure

The timing of when tax levies and tax liens come into play also distinguishes them significantly:

  • Tax Levies: These result from unpaid tax debt and typically follow the issuance of a Notice of Intent to Levy. In essence, tax levies are a post-debt enforcement measure. They kick in when tax liabilities remain unpaid, prompting the taxing authority to take direct action to recover the outstanding debt.

  • Tax Liens: Tax liens, on the other hand, are established at the outset of tax debt. They serve as a preemptive measure by the government to secure its interest in your property before any direct enforcement actions are taken. It’s akin to the government saying, "We have a claim to your property if you don’t satisfy your tax obligations."

Asset Impact

Tax Levies: Immediate Impact vs. Secured Interests

Lastly, the impact of tax levies and tax liens on your assets and financial well-being differs significantly:

  • Tax Levies: Tax levies directly impact your assets. The immediate consequence can be the loss of property or funds, as the government seizes these assets to settle your tax debt. This can be a distressing situation that requires swift action to mitigate.

  • Tax Liens: In contrast, tax liens primarily affect your credit and property rights. While they establish the government’s claim to your property, they don’t result in immediate asset loss. However, they can have lasting consequences on your creditworthiness, potentially making it challenging to secure loans or credit.

Conclusion

Understanding the disparity between tax levies and tax liens is essential for navigating the complexities of tax-related challenges. While both have significant implications, the nature of action, timing, and asset impact differ distinctly. When faced with tax difficulties, seeking professional assistance is paramount, and Priority Tax Relief stands ready to provide expert guidance and support for your tax-related concerns. Remember, knowledge is power, and being informed about tax levies and liens is a crucial step towards financial stability and peace of mind.

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FAQs

 The simple answer is no. A business and a person are completely separate, thus, any personal tax debts or liabilities should not affect your business.

Tax debt can be an exhausting and complicated thing to deal with on your own. Communicating with the IRS and professionally handling your tax liabilities are just two of the services companies like Priority Tax Relief can offer.

No. The IRS’s Innocent Spouse Relief protects you from paying these additional taxes. However, this does not relieve you from household employment taxes, business taxes, individual joint responsibility payments etc. Priority Tax Relief helps you learn more about innocent spouse relief.

The most popular option to date would be an Offer In Compromise (OIC). At Priority Tax Relief, we help tax relief help become more accessible to taxpayers in need and help them understand how they can qualify for these options.

IRS tax liens are legal claims on your property when you do not settle your tax debts. The IRS usually sends out a notice when no payment has been made after a liability assessment. Find out more about tax liens with Priority Tax Relief.

Yes. Not only can the IRS put a claim on all your current property, tax liens can also affect any property or intangible or tangible assets that you obtain in the future. At Priority Tax Relief, we help you understand federal tax liens and how to communicate with the IRS.

 

Tax levies are the actual seizure of your property and are different from legal claims or tax liens. Settle your taxes before the IRS sends out a notice. Priority Tax Relief helps you understand tax levies and how you can avoid them.

Yes. Not only can they seize physical property but they can also legally take hold of the money in your bank account and other wages. To avoid this from happening, contact Priority Tax Relief now.

Your debt will, unfortunately, continue to grow and you will possibly lose a great number of your assets. It is definitely a scenario we do not wish to see happen to anyone, that’s why Priority Tax Relief makes sure that our help becomes within reach.

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