Owing money to the Internal Revenue Service is disheartening, partly because they’re so harsh with the collection attempts. Some of the tools they have at their disposal are rather frightening. For example, they place a lien or a levy on your personal property.
Some people use the term tax lien or tax levy interchangeably, but they are actually very different. Understanding how these work and their purpose may be beneficial.
Tax lien
A tax lien occurs when the government stakes a claim against your property in order to cover back taxes. This doesn’t mean that your property is being taken immediately. Instead, this is just a notification that the IRS has a claim on the property.
Having a tax lien can damage your credit, which makes it harder to get a loan or mortgage. One issue with tax liens is that they can remain on your credit report, even after the IRS debt is settled.
Tax levy
A tax levy is the term for the IRS actually seizing your property. This can affect several things, including your wages, bank accounts, property and Social Security benefits. Because of the immediate seizure, a tax levy has a direct impact on your life.
It’s sometimes possible to find options to prevent IRS collection attempts. It’s best to find out what options are available so you can determine the best options for your situation. Working with someone who’s familiar with these matters may be beneficial since they can walk you through what each one means and provide assistance as you go through the process for the option you feel is best for you.