What is the Difference Between Lien and Levy?

The difference between a lien and a levy lies in their purpose and the actions they involve. Here are the key differences:

• Lien: A lien is a legal claim against your property to secure payment of your tax debt. It is a claim made by the government (either state or federal) against one's property, essentially marking your property as collateral for the debt owed. A lien is filed when the IRS assesses a tax against you and sends you a bill that you neglect or refuse to pay. Liens are usually filed with the county Register of Deeds and/or the Secretary of State as security for the debt.
• Levy: A levy is an actual attempt by the IRS or state agencies to seize your property, such as real estate, personal property, or cash you may have in a bank, to satisfy the tax debt. Levies are generally used when a taxpayer has failed to resolve a debt through voluntary payment. The IRS can levy wages, bank accounts, subcontractor pay, accounts receivable, retirement accounts, homes, cars, and business equipment. Levies are a specialized form of warrant and are typically not a matter of public record, but they can cause significant problems for taxpayers.

In summary, a lien is a legal claim against your property to ensure payment of tax debt, while a levy is the actual seizure of your property to satisfy the debt.

Comparative Table: Lien vs Levy

The main differences between a lien and a levy are as follows:

To summarize, a lien is a legal claim placed on property to ensure payment of tax debt, while a levy is the actual seizure of property to satisfy the tax debt. A lien serves as security for the debt, whereas a levy allows the government to take and sell the property to pay the debt. A lien typically comes before a levy, with the levy being a more difficult situation to deal with due to its involvement in the actual seizure of property.