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What is the difference between a tax lien and a tax levy?

Your home is probably one of the more valuable assets you own. Indeed, according to Ramsey Services, the average sales price of a house in the Golden State is upwards of $600,000, which is more than $280,000 more than the national average.

Owning a home gives you considerable flexibility, as you might be able to sell the property for a profit or take advantage of a home equity line of credit. Still, if the Internal Revenue Service puts a lien on your house or levies the property, your options are likely to dwindle or evaporate entirely.

Tax liens

If the IRS believes you are delinquent on your tax payments, you might receive a tax lien notice. A lien typically comes after you either fail to pay your outstanding tax bill or refuse to pay it.

With a tax lien, the IRS has a legal claim to your property, even though the IRS does not actually take the property. Still, before you can sell or transfer ownership of your home, you must take care of the tax lien.

Tax levies

A tax levy is somewhat more serious, as the IRS actually takes possession of your home. The purpose of taking your property, of course, is to sell it to pay your outstanding tax bill.

Generally, the IRS only uses tax levies when each of the following is true:

  • You have received a tax bill.
  • You failed to pay your tax bill.
  • You have received a Final Notice of Intent to Levy.
  • The IRS has notified you it may use third parties to try to secure your tax payment.

Ultimately, because both tax liens and tax levies directly affect your homeownership rights, you should take immediate steps to address any tax bill or IRS notice you receive.