A tax lien is a claim against property of a delinquent taxpayer. Property can be real estate, or it can be movable items such as vehicles, furniture, and even financial accounts. For example, a federal tax lien becomes a claim against retirement accounts, stock portfolios, and bank accounts, just like a piece of real estate or another tangible item such as an automobile or boat. Notice is given to the public of a tax lien when a document is filed in a public registry such as the Uniform Commercial Code (UCC) records or county deed records. This varies from state to state depending on where people register property transactions.
An IRS levy is action taken by the IRS to seize property of a delinquent taxpayer. A levy can be used to seize wages, bank accounts, stock certificates, contract proceeds, vehicles and even to foreclose the IRS interest against real estate such as the taxpayer’s home. While a tax lien is passive, in that it simply gives notice of the government’s interest in collecting a debt, a levy is active and results in an immediate seizure of assets.
The filing of a Notice of Federal Tax Lien, or an action by the IRS to levy against an asset of the taxpayer are both serious collection actions. They can result in the loss of property and can adversely impact the value of the taxpayer’s assets. If you receive a notice of levy or a notice that a federal tax lien has been filed, contact a tax professional or tax lawyer immediately so that you can properly evaluate your rights and be advised of possible action you should take to protect your interest in the subject property.