Liens and levies are financial controls on a person’s property by a creditor. In general, a levy is legal seizure of property while a levy is a legal claim against the property to satisfy debt. Read our blog to learn more.
A federal tax lien is a legal claim against property when an individual fails to pay their tax debts. Liens protects the government’s claim on all the debtor’s property including real estate and personal property.
Federal tax liens can be issued if the tax balances are overdue and after the IRS places a balance on the official record. Additionally, once the IRS sends an itemized bill and Notice and Demand for Payment the lien is activated.
How It Affects You
Once a lien is in place on a person’s property, it can be attached to all assets including property, securities, vehicles, and other assets including future assets acquired and their yield. Notice of a Tax Lien can affect credit and the ability to get new lines of credit in the future. Businesses with liens could lose the right to their own properties including accounts receivable. For those in an already difficult financial position a Notice of Federal Tax Lean cannot be discharged.
Getting Rid of a Lien
The easiest way to get rid of a lien is by paying off the tax debt. However, if an individual cannot pay off the debt they owe, they have approximately three options:
- Discharge property: Discharging property removes the lien from that property
- Subordination: This does not remove the lien but allows other creditors to pursue debt repayment before the IRS
- Withdrawal: A withdrawal removes the Notice of Federal Tax Lien and establishes that the IRS will not be competing with other creditors
A levy is the legal seizure of property to satisfy tax debts. Under a levy the IRS can garnish wages or take money directly from financial accounts. It is important to note that one the IRS engages it’s right to seize property.
The IRS will issue a levy if:
- The IRS sent a Notice and Demand for Payment
- The borrower failed to pay their taxes
- The IRS sent a Final Notice of Intent to Levy and Notice of Your Right to a Hearing
- The IRS has sent an advance notice of Third Part Contact to inform the individual that a third party will handle the collection of the tax liability
Protect Your Finances
If you are facing a tax lien or levy, contact the Law Office of Seni Popat, P.C. Our attorney can help you navigate the complexities of tax liens and levies and create a strategy with your best interests in mind.
Contact our attorney today for more information.