Federal tax law gives the IRS multiple tools for collecting unpaid taxes. Several of these do not require the IRS to file anything with a court before acting. A federal tax lien makes the tax debt a matter of public record and can have a substantial effect on a taxpayer’s financial interests. The IRS may also levy a taxpayer’s property in many cases, meaning it can seize any property not exempted under federal law. In the early days of the COVID-19 pandemic, the IRS offered taxpayers a respite from collection activities. While that respite ended last summer, some forms of relief may still be available for Pennsylvania taxpayers who owe the IRS.
Tax Liens vs. Tax Levies
The terms “lien” and “levy” sound somewhat similar, and people sometimes get them confused with one another. The two processes are related, but they are also very different from one another. Understanding the difference is very important.
Federal Tax Liens
A lien is a type of legal right over someone’s property, which creates a security interest for a creditor. In order to acquire a lien over a taxpayer’s property, the IRS must send a notice to the taxpayer informing them of the amount of tax they owe and making a demand for payment. Ten days after the IRS demands payment, the lien attaches to the taxpayer’s property if they have not paid the amount demanded.