Tax problems can be overwhelming, especially when they escalate to liens and levies. If you’ve received a notice from the IRS or suspect you’re at risk, it’s crucial to understand the difference between a tax lien and a tax levy, how they affect your financial life, and what steps you can take to resolve them.
What is a Tax Lien?
A tax lien is a legal claim the government places on your property (like your home, car, or business assets) because you owe back taxes. Think of it as a warning sign. The IRS is saying, “We have a right to your assets if you don’t pay your tax debt.”
- It doesn’t mean your property is being taken—yet.
- It shows up on your credit report and can make it hard to get loans or sell your property.
- It protects the IRS’s interest while giving you a chance to pay or resolve your tax debt.
A lien is passive—it just sits there, but it has serious financial consequences if you ignore it.
What to Expect if the IRS Issues a Tax Lien
When the IRS files a lien:
- You’ll receive a Notice of Federal Tax Lien.
- Your credit rating can drop significantly.
- It may be harder to sell assets or secure loans.
- The lien follows you even if you move or sell your property.
Pro Tip: Even after full payment, the lien may remain on your credit report unless you request a withdrawal.
How Can I Avoid a Tax Lien?
Avoiding a tax lien starts with proactive communication and compliance.
Steps to Avoid a Lien:
- File taxes on time, even if you can’t pay in full.
- Pay your taxes or set up a payment plan with the IRS.
- Respond promptly to IRS notices.
- Consider an Offer in Compromise or Currently Not Collectible status if you qualify.
What is a Tax Levy?
A tax levy, on the other hand, is when the IRS takes action to seize your assets to satisfy a tax debt. This is much more serious and can happen after a lien if you haven’t made arrangements to pay.
The IRS can levy:
- Bank accounts (they can withdraw funds directly)
- Wages (your employer sends part of your paycheck to the IRS)
- Real estate or personal property (in some cases, they can seize and sell your home or car)
A levy is an active collection—the IRS is not just warning you anymore, it’s taking your money or property
What to Expect if the IRS Levies Your Assets
If a levy is initiated:
- The IRS typically sends a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before taking action.
- Once the levy is in effect, your bank may freeze funds for 21 days before sending them to the IRS.
- Employers are required to redirect wages to the IRS until the debt is resolved.
How Do I Know a Tax Levy Is Coming?
You will receive written notification from the IRS. Key forms include:
- CP504 – Notice of Intent to Levy
- LT11/Letter 1058 – Final Notice of Intent to Levy
Never ignore these notices—they signal that you’re out of time to delay action.
What’s the Difference Between a Levy and a Lien?
Tax liens and tax levies are both tools the IRS uses to collect unpaid taxes, but they’re very different in how they affect you. Understanding the distinction is crucial if you’re facing tax debt.
Tax Lien | Tax Levy | |
What it does | Claims your property as collateral | Takes your property or money |
When it happens | After unpaid taxes and notice | After the lien and no payment arrangements |
Credit impact | Yes, it affects your credit | No direct credit report impact, but very disruptive |
Reversible? | Yes, if paid or settled | Yes, but harder to stop once it begins |
What Happens If You Ignore a Tax Lien?
Ignoring a tax lien can lead to:
- Increased penalties and interest
- Asset seizure through a levy
- Long-term damage to your credit
- Legal consequences and complications with future loans or refinancing
How to Handle a Tax Levy
If you’re already facing a levy, act immediately:
Possible Solutions:
- Request a Collection Due Process (CDP) hearing.
- File an Appeal to stop or reverse the levy.
- Apply for an Installment Agreement.
- Submit an Offer in Compromise to settle the debt.
- Prove economic hardship to obtain the Currently Not Collectible status.
When to Seek Professional Help
If you’re dealing with a tax lien or levy, you don’t have to face the IRS alone. The process can be overwhelming, especially when you’re unsure of your rights or the best steps to take. That’s where professional tax resolution services come in.
How Tax Professionals Can Help You:
Working with experienced tax professionals, like the team at Tax Relief Helpers, can make a significant difference. Here’s how they support you:
- Communicate Directly with the IRS:
Skip the stress of phone calls and letters. Tax experts speak the IRS’s language and handle all communication on your behalf. - Negotiate Better Terms:
Whether it’s an Installment Agreement, Offer in Compromise, or getting your account classified as Currently Not Collectible, professionals can often secure more favorable terms than you could on your own. - Ensure All Deadlines and Paperwork Are Met:
Mistakes and missed deadlines can make your tax situation worse. Tax pros help you file the right forms at the right time, avoiding costly errors. - Protect Your Assets and Future:
A levy can wipe out your bank account or garnish your wages. A professional can help stop or reverse levies and release liens, preserving your financial security. - Give You Peace of Mind:
Dealing with the IRS can be emotionally draining. Having a knowledgeable advocate on your side lets you focus on your life while they handle the details.
Tax professionals understand the process and can prevent costly mistakes. Don’t try to navigate complex tax problems alone.
Can a Tax Lien or Levy Affect My Credit?
Yes, significantly:
- Tax liens may be reported to credit bureaus, lowering your score.
- Levies can drain your financial resources, impacting your ability to pay other obligations.
Even though tax liens are no longer listed on credit reports by major bureaus, lenders still consider them a red flag.
Conclusion
Understanding tax liens and levies is key to preventing or minimizing the financial damage they cause.
If you’ve received IRS notices or are struggling with tax debt, the time to act is now.
Contact Tax Relief Helpers to explore your options and protect your assets. Our experts offer trusted guidance and tailored solutions to help you find relief.Visit our blog for more insights on resolving IRS issues and protecting your financial future.
Written by: Thomas Brooks
Published: July 7, 2025