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What distinguishes a tax lien from a tax levy?

On Behalf of | Dec 22, 2022 | Tax Controversies |

Even if you have a mortgage, your house undoubtedly is one of the more valuable things you own. Indeed, according to Zillow, the average home value in the White Plains area is currently more than $750,000.

Whether you want to keep your house forever, sell it or take advantage of its equity, you should receive the full benefit of your investment. If the Internal Revenue Service interferes with your homeownership rights, though, that might not happen.

Your property rights

Even though they are different, tax liens and tax levies both interfere with your property rights. That is, each of these limits what you can do with your property. Still, tax levies typically are more restrictive than tax liens.

Tax levies

With a tax levy, the federal government takes your home. If you cannot pay your outstanding tax bill, the IRS sells the property. Along with your home, the IRS can levy your bank accounts, retirement savings, business and vehicle.

Tax liens

Even though they are less serious than tax levies, tax liens are something you should take seriously. When the IRS puts a lien on your property, the federal government has a legal claim to your home. If you sell the property, the IRS takes the proceeds to satisfy your outstanding debt. A tax lien also appears on your credit report, so it can cause your credit score to drop.

Ultimately, because of the potentially disastrous consequences of tax liens and levies, it is advisable to promptly address any notices you receive about either.