What is the difference between an IRS Lien and a Levy?

Many people that we talk to tell us numerous times “I can’t have the IRS file a lien against me.” Sometimes, these people understand what a lien is and why an IRS lien is bad. But more often, they are confused about what a lien is and what they are really worried about is the IRS taking their money or property.


What an IRS Lien Is NOT:

An IRS lien does not give the IRS the right to take money out of your bank account, to garnish your pay check, or to take anything away from you (without the troublesome process of going to court). These things are accomplished through an IRS “levy” or a seizure.


If you owe money to the IRS, it has the right to take your money to pay it back. In order to do so, it has to give you the opportunity to go to a separate group within the IRS, the Appeals Division, to discuss any collection alternatives you may be able to pursue other than having the IRS take your money.


You get this opportunity when the IRS issues a letter that is entitled a “Final Notice of Intent to Levy.” This letter goes out by certified mail and you only have a short window of time to file for this important Appeals Hearing. You only get the right to this Appeals Hearing before levy ONCE for each tax year that you owe for. If you miss your opportunity, or if you have a hearing and don’t resolve the matter, or if you reach a resolution and later default from it – the IRS can take your money, basically without warning.


What an IRS Lien IS:

All that an IRS lien does is put in the public records that you owe money to the IRS. This recording entitles the IRS to a few different things: (1) if you sell an asset (such as your house), the IRS gets paid before anyone who files a lien after it; (2) it secures the IRS’s place in line as a creditor if you file bankruptcy; and (3) it gives the IRS the right to foreclose on assets – such as your house.


Of course, the major reason that people should be concerned about an IRS lien is that it harms your credit. If you are in an industry in which your ability to work is closely tied to your personal financial situation or your credit, this could be a devastating event. It could cause you to lose your job or be passed over when looking for a job. Unfortunately, the IRS is aware of the damage to your credit and it does not care.


You can’t have an IRS lien removed or avoid having one filed just because it will hurt your credit. If, on the other hand, you have special circumstances where the IRS lien filing will cause you to lose your job, or not be able to get an important line of credit that will keep your business open, or otherwise destroys your ability to earn an income – then there are procedures available to have the lien removed. The IRS is very reluctant to grant these requests and we recommend that anyone trying this seek experienced counsel to assist them.


If you need assistance, contact us. We can help.