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What’s The Difference Between a Levy, Lien, and Garnishment

by | 12-9-2019 | Tax Relief

The IRS can be hard to deal with – particularly when you have no tax-related knowledge. For those who owe the IRS money, it’s essential to understand not only what potential action the IRS can take against you, but also how the IRS works. If you owe a tax balance, the IRS can place your account in collections, place a lien on your assets, garnish your paychecks, and even levy your bank account(s).

Here are some things you need to know to prevent yourself from falling into collections if the IRS is taking action against you.

What is Lien?

The IRS can (and often will) place a lien against your assets if you owe a tax debt this is a federal law. They can put a lien on physical assets such as a vehicle or home to ensure that they get the maximum about of money possible if a taxpayer intends to sell those assets; the IRS takes a portion of the profit from selling the assets and use it to pay toward the overdue tax balance.

Paying your balance owed on time and in full will prevent having a tax lien placed against you. If you won’t or can’t pay off the balance, you can contact the IRS to find out what other payment options might be available to you.

What is Levies?

If a tax balance owed is not paid in full, the IRS will send several collection notices to warn the taxpayer of intent to levy. The IRS can do some legal claim like levy your assets if they consider you a delinquent taxpayer, which lets them go after your wages, property, or bank accounts to settle the debt you owe.

Sometimes the IRS will take only a small amount of money from a taxpayer. Other times, they will seize entire life savings to cover a tax debt. If you can prove that you are in a hardship situation, you can contact the IRS directly and ask them to release the levy.

You can also stop the levy by paying the entire amount owed, proving that the collection statute of limitations is expired, or showing that the value of your property far exceeds the amount you owe the IRS.

What is Garnishment?

If you have an unpaid balance, the IRS could garnish your wages. Garnishment allows the IRS to legally seize your income to make payments on the balance owed. They can garnish bonuses and commissions in addition to paychecks. Paying your balance owed on time and in full will prevent wage garnishment.

Another way to stop wage garnishment by setting up a payment plan with the IRS or establishing a hardship agreement. Both options are available only to those who qualify.

The IRS is notorious for acting against those who don’t pay their tax debts, and they can use garnishment, levies, and liens to do so. All taxpayers are expected to be compliant with the IRS and follow the most recent tax laws to stay out of trouble and out of collections.