subject: Tax Lien And Tax Levy: An Effective Instrument Of Tax Debt Collection [print this page] Tax lien is issued by a government agency to a delinquent taxpayer on his real property. This tax is usually imposed by the creditor or the federal government when original owner of the property become bankrupt or is late on paying real property taxes. Tax lien is the right or claim of a government. It is issued in the form of notification ordering to seize and encumber property and sell it in the form of tax lien certificates if taxes remain unpaid.
A lien provides the government only the statutory right to hold the property for a specific period of time before selling so that the defaulter may get an opportunity to pay back those taxes. In case of non payments, the property seized must have the capacity to make full payments of arrears; otherwise the government can resort to seizure of other property not associated with the taxes or wage garnishment. Tax liens make the new owner responsible for paying back taxes on property so sold.
Unlike tax lien, tax levy is a lawful seizure of delinquent tax payer's assets and property as a mode for repaying unpaid tax debt. A tax levy allows the government a legal right to physically take personal or real property of the delinquent taxpayer and sell it to satisfy tax debt liability. Tax levies are issued only after the assessee have received a notice and demand for payment , Final Notice of Intent to levy and Notice of right to a hearing and have failed to pay taxes within this notice period.
Tax levies grants the government to seize and sell the personal property like car, home, electronic items, etc. of the offender. Besides, levies can also be imposed on property held by someone else such as wages, dividends, rental income, bank accounts, account receivables, retirement accounts, bank accounts or the cash value of life insurance policies. Tax levies can also be served upon employer to garnish income from wages, commissions, salary or other payments until the tax debt is paid in full.
Tax lien and tax levy are tools used by sovereign authority to collect taxes. Both tax arrangements are different in many aspects. A lien is a government's legal right on the negligent taxpayer's property which ensures security on tax debt. It does not result in actual seizure or sell of property to satisfy a tax liability. This is performed by tax levy. Thus a tax levy is an administrative action while tax lien is a mere service of notice. A tax lien gives the government the ability to claim collection without getting any permission from a court. However, a tax levy could only be imposed after a proper notification has been issued to the delinquent tax payer.
