In The Know: Glossary of IRS terms
Federal tax lien: A legal claim against current and future property (i.e. houses, cars) and rights to property (i.e. wages, bank accounts).
A lien is the US government’s legal claim against a taxpayer’s property in the event that the taxpayer neglects or fails to pay a tax debt.
A tax lien arises automatically once a taxpayer fails to pay in full taxes owed within 10 days after the US Internal Revenue Service (IRS) sends the first notice of taxes owed and demand for payment.
A tax lien attaches to assets such as property, securities and vehicles, as well as to future assets acquired during the duration of the lien. Once the IRS files a notice of federal tax lien, it may limit the taxpayer’s ability to get credit, among other effects.
Levy: A legal seizure of property or rights to property to satisfy a tax debt. When property is seized (“levied”), it will be sold to help pay the tax debt. If wages or bank accounts are seized, the money will be applied to the tax debt.
The seizure is made only after three requirements are met:
Article continues after this advertisementThe IRS has assessed the tax and sent a notice and demand for payment.
Article continues after this advertisementThe taxpayer has neglected or refused to pay the tax.
The IRS has sent a final notice of intent to levy and levy notice at least 30 days before the levy.
Notice of intent to levy: The IRS sends this notice before property is seized. If the taxpayer does not pay overdue taxes, or make other arrangements to satisfy the tax debt, or request for a hearing within 30 days of the date of the notice, the IRS may seize the property. Compiled by Kate Pedroso, Inquirer Research
Source: IRS.gov
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