An Overview of IRS Tax Liens and Levies

kienitz lien tax

What’s worse than filing your taxes? Finding out you have an unexpected tax bill due. And what could be worse than a surprise tax bill? Having the IRS place a lien or levy on your property. But why are tax liens and levies so bad? Read on to find out.

IRS Tax Lien Basics

An IRS tax lien is a type of security interest placed on the property of a taxpayer to help the IRS collect an outstanding tax debt from that taxpayer. In other words, it’s a way for the IRS to force the taxpayer to provide collateral for the tax debt.

When the IRS imposes a tax lien, it attaches to all of the taxpayer’s property, including real estate, vehicles and securities (like stocks). Until the lien is removed, any future property the taxpayer obtains will also be subject to the IRS lien. This means that if the taxpayer sells an asset with an IRS tax lien on it, the purchase price paid belongs to the IRS, not the taxpayer. This situation exists until the tax debt is paid off in full, including penalties and interest. The IRS tax lien can also survive bankruptcy in certain situations.

A taxpayer can avoid a tax lien by simply paying all of his or her taxes on time or through a payment plan. Basically, as long as the taxpayer doesn’t ignore the IRS’ attempts to collect an outstanding tax debt, they should be able to avoid a tax lien.


IRS Tax Levy Basics

An IRS tax lien sounds pretty bad for the taxpayer, and it is. But a tax levy is even worse. That’s because a levy is the seizure of property to pay off a tax debt. Put another way, a tax lien is simply a legal tool saying the taxpayer’s property is subject to the owner’s tax debt. In contrast, a tax levy is the IRS actually taking the property away from the taxpayer.

A variety of property can have a levy placed on it. Bank accounts, paychecks, personal property and real estate are all potentially subject to a tax levy. When the IRS places a tax levy on the taxpayer’s property, they could find his or her paycheck or bank account suddenly much smaller or piece of real estate listed at a property auction.

How does the levy take place? It begins with the taxpayer doesn’t pay his or her taxes. Then, the taxpayer either ignores the IRS’ attempt to collect the tax debt or refuses to pay it. Finally, the IRS notifies the taxpayer with a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing at least 30 days before the levy goes into effect. In most situations, the IRS does not need to go to court to get a tax levy.

A taxpayer may avoid a tax levy just like they can avoid a tax lien: paying his or her tax obligations in a timely fashion and not ignoring the IRS’ attempt to collect an outstanding tax debt.


Bottom Line

IRS tax liens and levies are serious tax issues that often require additional help. If you can’t consult with a tax attorney, CPA or other tax professional, consider contacting the Taxpayer Advocate Service by calling 877-777-4778 or visiting its website.





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