Difference Between Tax Levy and Tax Lien

Tax levy is an authorised spasm for the property of the accused to balance thier tax debt. Levy is known as the enforced collection action and is certainly different from lien. A lien is considered as a claim, which is utilised as a security against the debt of accused. However, a levy mortgages the property of accused to satisfy tax debt. If an individual is unable to pay off taxes or to make arrangements for settling debt, Internal Revenue Service (IRS) is likely to imply a levy on him/her. On the other hand, a legal tax lien attaches the property of accused and take all their rights for property, held by the third party. This types of property includes retirement account, saving account, brokerage account and also accounts receivable (if the entity is business).

Levy provide many authorities to IRS, like seizing and selling the property of accused individual. It also include personal assets of the individual, such as real estate and car, which is owned by them. IRS also has the power to seize and sell the property of individual, which is currently in the possession of someone else. As per the conditions of tax levy, the property of defaulter include retirement accounts, bank accounts, rental income, dividends and cash value of insurance policies. IRS can also impose levy on the wages, commissions, salary and other payments for personal services of the defaulter. Moreover, the tax levy can be also implied over the pension, retirement income and social security of the individuals.

However once an individual filed a lien, the potential of their credit rating is eventually harmed. On filing a lien, the person will not be provided with loans and new credit cards. Moreover, they are also not authorised to sign a lease and rent an apartment or home. Tax lien can impact on the credit report of an individual for up to 10 years or even more, if the defaulter is again charged. The situation of lien is a serious matter and therefore, the individuals are required to consult professional and experienced bankruptcy attorneys. It is better for the defaulters to resolve their tax liabilities before filing for a lien.

In addition, the tax liabilities can be also setted for less if the accused applies for Offer in Compromise (OIC). OIC is handled by experienced tax professionals, since qualifying for this step by the individuals is quite difficult. Mainly in the case of default, individual should head towards eventual pay off or completely write off the debt. For doing these, bankruptcy attorneys are counted among the premium sources, which can provide a good advice and sufficient information to the accused regarding its laws.