IRS Levies and Liens: When Collection Gets Serious

What’s the difference between an IRS levy and an IRS lien?

People often confuse these terms, but they’re very different collection tools.

A Federal Tax Lien is a legal claim against all your property—real estate, vehicles, business assets, accounts receivable, everything. When the IRS files a lien, it becomes public record. It appears on your credit report, making it nearly impossible to get loans or credit. It can prevent you from selling property. It alerts other creditors that the IRS has first priority to your assets.

The IRS files a Notice of Federal Tax Lien once you owe more than $10,000 and haven’t made payment arrangements. I’ve seen liens destroy credit scores overnight. A Chicago business owner I worked with had an 810 credit score. Two weeks after the IRS filed a lien, it dropped to 580. The lien stays on your credit report for seven years after it’s released.

An IRS Levy is the actual seizure of your property to pay your tax debt. The IRS can levy your bank account, garnish your wages, seize your house, take your car, or even seize your business assets.

Bank levies are especially devastating. The IRS contacts your bank, and the bank freezes your account for 21 days. After that, the bank sends the money to the IRS. I’ve had clients whose mortgage payments bounced, whose businesses couldn’t make payroll, whose rent checks bounced—all because of surprise bank levies.

Wage garnishments take a significant portion of your paycheck—often 70-80% of your net pay—leaving you almost nothing to live on.

The IRS is threatening to levy my bank account or garnish my wages. Can you stop this?

Yes, in most cases, I can stop or prevent levies, but time is absolutely critical.

Before the IRS can levy, they must send you several notices: a notice of taxes owed, a Notice of Intent to Levy, and a Final Notice of Intent to Levy. That final notice gives you 30 days to request a Collection Due Process hearing, which stops the levy.

If the IRS has already levied your bank account, we have 21 days before the bank sends the money to the IRS. During that window, I can sometimes negotiate a release, especially if the levy creates significant hardship.

For wage garnishments, I can often get releases by setting up an installment agreement or proving economic hardship.

I worked with a Cleveland nurse whose wages were being garnished 80%. She was bringing home $300 every two weeks on a $3,500 paycheck. She was about to lose her apartment. We immediately set up an installment agreement for $400 monthly, which the IRS accepted, and they released the wage levy within five days. She got her full paycheck back while resolving her debt affordably.

How do I get an IRS lien released or withdrawn?

Getting a lien released or withdrawn requires either paying off your tax debt completely or meeting specific IRS criteria for early release.

Full Payment: Pay your tax debt in full, and the IRS releases the lien within 30 days.

Discharge of Property: If you need to sell property (like a house) that the lien attaches to, we can request a discharge for that specific property. The IRS gets paid from the sale proceeds, and the lien is removed from that property.

Subordination: This moves the IRS lien behind other creditors, making it easier to get a loan or refinance. The IRS doesn’t give up their lien, but they agree to let another creditor take priority.

Withdrawal: This is the gold standard. A withdrawal completely removes the public lien notice as if it was never filed. Your credit report is cleared. But withdrawal only happens in specific situations: you entered into a Direct Debit Installment Agreement, you qualify for Fresh Start provisions, or the lien was filed in error.

I recently got a lien withdrawn for a Detroit contractor who’d set up a Direct Debit Installment Agreement for $85,000 in tax debt. Under the Fresh Start program, the IRS withdrew the lien, clearing his credit and allowing him to bid on government contracts again. Within six months, his credit score recovered, and his business opportunities expanded dramatically.