A Federal Tax Lien is a claim against property. When you don’t pay your fist tax due a lean is filled and it is attached to any property you owe or any future rights you may have to a property. This lien is reported to credit reporting agencies and have negative effect on your credit rating and make difficult for you to receive a credit such a loan or a credit card. Once your debt is fully paid off, Federal Tax Lien gets “released” or it can be “withdraw” if you make arrangements with IRS such as installment Agreement.
Levy is a seizure of property. While a Lien is claim against your property, Levy is actual legal seizure where IRS actually takes your property or a right to a property to satisfy your tax debt. If you have current Installment agreement or Offer in Compromise, IRS cannot asses a levy.
Example of property that can be “levy”:
-Wages, salary or commission, bank accounts, federal payments, house, car or other property
Property that cannot be seized:
-Unemployment benefits, certain pension benefits, workers compensation, certain public assistance payments, minimum weekly exempt income, court ordered child support