When Should You Use a Levy Instead of a Lien?

A levy is a process through which your property is taken by the government to pay off a tax obligation. There is a distinction to be made between liens and levies. The difference between a tax lien, which is a claim against your property, and a levy, which removes your property to fulfill the tax obligation, is in the method by which the debt is satisfied.

When the Internal Revenue Service (IRS) determines that you owe taxes and sends you a bill for those taxes, but you fail to pay them, a federal tax lien is created. The IRS will notify your creditors about the government’s claim on your property by filing a public document called a Notice of Federal Tax Lien. If you get a notice from the Internal Revenue Service that they plan to file a Notice of Federal Tax Lien, you may submit an appeal. You may find information about filing an appeal.

The IRS will notify your other creditors of its secured claim over your assets by filing a Notice of Federal Tax Lien with the appropriate public authorities. The Notice of Federal Tax Lien could be uncovered by credit bureaus and included in your credit file as a negative item. Your credit score shouldn’t be impacted by an IRS levy since the information is not made public.

When dealing with people or corporations who owe taxes, the IRS will do what it takes to ensure that its interests are protected. The Notice of Federal Tax Lien is the form that may be used for this purpose. If you owe taxes and the IRS files this kind of claim against you, the government agency will be able to confiscate any property you own or may own in the future. The filing of a tax lien by the IRS may have serious consequences for taxpayers, particularly those who are behind on their payments.

The Repercussions of a Tax Lien

A tax lien might have consequences beyond only a negative impact on your credit score. Your ability to fulfill your responsibilities as a property owner would be severely limited while the IRS had control of your assets. You may end up paying more than just your overdue taxes if selling or refinancing your home proves to be problematic. Because of this, the community as a whole is impacted. That’s because if you can’t make your mortgage payments, you could have to relocate to a less expensive part of town. The IRS may have taken possession of your home, but they are not compelled to maintain it clean or secure from the kinds of criminal activity that often occur in abandoned properties.

Resolving a tax lien may be arduous and time-consuming. When your tax bill is paid in full, the lien will be released. The time and effort required to locate the extra cash to make reparations might come from working overtime or additional shifts. Regardless matter which of the three alternatives you choose to pursue, the application process is lengthy and paper-intensive. One must also learn about when does the IRS file a tax lien.