It’s not unusual for a person to find himself behind on his income taxes, so take heart and know that solutions exist. When faced with a tax debt, the government’s next move is to either slap you with a tax lien or tax levy. Between the two, the consequences of a tax levy can be more serious. Consider the following differences between a tax levy and tax lien, and why one is more damaging than the other to your overall financial health:
A lien doesn’t involve seizure of your property
A tax lien only grants the government the rights to your asset before any private creditor. A levy, on the other hand, involves the complete seizure of your property to settle your tax debt. Tax levies are often the result of long overdue liens.
Almost none of what you own is safe in a tax levy
When facing a tax levy, practically everything you own can be seized by the IRS to pay off your debt. This includes your home, car, income, and even your retirement account. It doesn’t matter if your accounts include someone else’s name, such as a life insurance or joint account. If it has your name on it, the IRS can potentially seize it.
When the IRS sends you a notice about unpaid taxes, you need to act on it by consulting a lawyer as soon as possible. You don’t want your problem to reach the point of no return.