An IRS or State tax levy is the actual action taken by the taxing authority to collect taxes. For example, the IRS can issue a bank levy to obtain your cash in savings and checking accounts. Or the IRS can levy your wages or accounts receivable. The person, company, or institution that is served the levy must comply or face their own IRS problems. The additional paperwork this person, company or institution is faced with to comply with the levy usually causes the taxpayer’s relationship to suffer with the person being levied. Levies should be avoided at all costs and are usually the result of poor or no communication with the IRS or State. When the IRS levies a bank account, the levy is only for the particular day the levy is received by the bank. The bank is required to remove whatever amount is available in your account that day (up to the amount of the IRS levy) and send it to the IRS in 21 days unless notified otherwise by the IRS. This type of levy should not affect any future deposits made into your bank account unless the IRS issues another Bank Account Levy.
A tax lien is a statutory right obtained by the government to enforce a claim against the property of a person owing taxes until the debt is paid. The IRS and State can make your life miserable by filing federal and State tax liens. Tax Liens are public records that indicate you owe the IRS and/or State various taxes. They are typically filed with the County Clerk in the county where you or your business operates. Because they are public records they will show up on your credit report. This often makes it difficult for you to obtain financing on an automobile or a home. Tax Liens also can tie up your personal property and real estate. Once a Tax Lien is filed against your property you cannot sell or transfer the property without clearing the title by having the lien removed.
A wage garnishment or wage levy is a very powerful tool used to collect taxes owed through your employer. Once a wage garnishment is filed with an employer, the employer is required to collect a large percentage of each paycheck. The paycheck that would have otherwise been paid to the employee instead will now be paid to the IRS or State. The wage garnishment stays in effect until the balance is fully paid or until the IRS and/or State agree to release the garnishment.