Last Updated on September 9, 2025
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A tax lien and a tax levy are tools that counties and the Internal Revenue Service use to collect unpaid taxes. Understanding the difference is important because a lien can affect your ability to get credit, while a levy can result in the forced seizure of your property.
What is a tax lien?
A tax lien is a legal claim the government places on a taxpayer’s property when taxes remain unpaid. It protects the government’s interest in all of your assets, including real estate, personal property, and financial accounts. The lien exists after the IRS assesses your liability, sends you a bill, and you fail to pay it.
- Creation: After you neglect or refuse to pay your tax bill, the IRS files a public Notice of Federal Tax Lien to alert creditors.
- Effects: A lien attaches to all your property and can limit your ability to get credit, sell, or refinance property.
- Removal: Paying your tax debt in full is the fastest way to release a lien; the IRS typically removes the lien within 30 days after full payment.
- Avoidance tips: File and pay taxes on time. If you cannot pay in full, arrange a payment plan rather than ignoring IRS notices.
What is a tax levy?
A tax levy is the legal seizure of property to satisfy tax debt. Unlike a lien, which is only a claim, a levy allows the IRS to take assets such as wages, bank accounts, or real estate. The IRS typically issues a levy after multiple notices and a final demand for payment.
- How it works: Before a levy, the IRS sends a Final Notice of Intent to Levy and gives the taxpayer 30 days to pay or appeal.
- Seizure: The levy can freeze funds in a bank account, garnish wages, or take physical property to satisfy the debt.
- Relief options: You can request a collection due process hearing, negotiate a payment plan, or prove financial hardship to release the levy.
- Consequences: Once assets are seized, reclaiming them can be difficult and expensive, so you need to act quickly.
How do tax liens and levies differ?
| Factor | Tax Lien | Tax Levy |
| Purpose | Secures the government’s interest in your property | Seizes property to satisfy the tax debt |
| Timing | Can be filed early in the collection process after a demand for payment | Occurs later, after final notices and failure to respond |
| Impact on property | Restricts selling or financing; property remains yours | Directly seizes wages, bank accounts, or property |
| Public record | Notice of Federal Tax Lien is public, affecting credit | A levy is not generally a public record |
| Avoidance strategies | Pay taxes on time or arrange a payment plan; respond to IRS notices | Respond to final notices, request hearings, negotiate payment plans |
How does a tax lien affect your financial life?
A lien attaches to all your assets, which can hamper your ability to:
- Secure loans: Lenders may hesitate to extend credit when they see a lien in the public record.
- Sell or refinance property: You must resolve the lien before closing; otherwise, the lien remains on the title.
- Run a business: A lien can attach to accounts receivable and other business assets.
- File for bankruptcy: The tax debt and lien may continue even after bankruptcy.
Staying current on taxes and responding promptly to IRS notices can prevent a lien from escalating into a levy.
What happens if a lien escalates to a levy?
If you ignore a lien and continue to miss payments, the IRS can proceed to a levy. According to tax law practitioners, a levy is one of the most aggressive collection tools; it seizes assets after repeated notices. A levy can freeze bank accounts, garnish wages, or take physical property, leaving you without access to funds. Contacting the IRS and arranging a payment plan or demonstrating financial hardship may halt the levy.
Frequently asked questions (FAQs)
A tax lien is a claim against property for unpaid taxes, while a tax deed sale transfers ownership of the property when taxes remain unpaid. For more on tax deed risks, see our article about tax deed title mistakes where we discuss common pitfalls and how to avoid them.
The Notice of Federal Tax Lien does not appear on consumer credit reports, but it is a public record and can influence a lender’s decision.
The quickest way is to pay the tax debt in full. Otherwise, you may qualify for discharge, subordination, or withdrawal under certain conditions.
Respond immediately. You have 30 days to pay, appeal, or arrange a payment plan. Ignoring the notice may result in seizure of assets.
Check our post about partnering on deals and our article on Maricopa County’s tax lien sales to see how counties use tax liens to fund public services.
Final thoughts
Understanding the difference between tax liens and tax levies is essential for property owners and investors. A lien signals that the government has a claim on your property for unpaid taxes. If you ignore the lien and fail to communicate with the IRS, the situation can progress to a levy, which takes your assets. Staying informed, keeping your taxes current, and acting quickly when notices arrive can help you avoid the worst outcomes.To start your journey, explore our free resources or schedule a free call to discuss your goals. Our mission is to provide easy‑to‑follow guidance so you can navigate tax liens and deeds with confidence.
