IRS Liens vs. IRS Levies

IRS liens and IRS levies are very different from one another, but it is easy to get the two terms confused or use the terms interchangeably. An IRS lien secures the government's interest in your property if a tax debt is not satisfied on time. An IRS levy, on the other hand, actually refers to the act of the IRS seizing and selling any type of property or assets that you own.

How IRS Liens Work

When your taxes are not paid, the IRS establishes a lien against all of your assets, particularly real estate. This gives the IRS the legal right to collect your taxes from the sale of your assets, which can include just about everything you own. A lien against your company could be especially detrimental for business owners as the lien would seize your accounts receivable. At this point, everything you own and your income is just one short step away from becoming the property of the United States government.

The IRS will initiate a federal tax lien by placing a public notice on your property and your accounts. The notice will alert creditors that the government has a priority over your property and has legal right to take the property when the IRS seizure is necessary to clear a debt. Liens filed against you by the IRS will show up on your credit report and credit score. Liens will often prevent you from opening a checking account, taking out a loan for a new car or home, or borrowing money.