IRS Liens & Levies — Protect Your Property, Bank Accounts & Wages

The Difference Between a Lien and a Levy

The IRS has two primary enforcement tools for collecting unpaid tax debt, and taxpayers frequently confuse them. A tax lien is a legal claim against your property. A tax levy is the actual seizure of that property. The distinction matters because the legal remedies, timelines, and defense strategies are different.

A lien protects the government's interest by putting the world on notice that the IRS has a claim on your assets. It does not take anything from you directly. A levy, by contrast, is the IRS reaching into your bank account, paycheck, or other assets and taking the money. Liens are passive; levies are active. Both require specific notices and both can be challenged — but the urgency and the approach differ significantly.

At Brotman Law, we handle both sides of IRS collection enforcement. Whether you need a lien withdrawn after settling through an offer in compromise, an emergency bank levy released, or a wage garnishment stopped, we intervene directly with the IRS and protect your rights under the Internal Revenue Code.

Notice of Federal Tax Lien (NFTL)

When you owe taxes and fail to pay after the IRS sends a notice and demand, a statutory lien automatically attaches to all of your property under IRC §6321. This happens by operation of law — no filing is required. However, the IRS can also file a Notice of Federal Tax Lien (NFTL) with your county recorder's office, which makes the lien a matter of public record.

The NFTL has serious consequences. It appears on credit reports and can drop your credit score by 100 points or more. It clouds title to real property, making it difficult or impossible to sell or refinance. It establishes IRS priority over other creditors, including banks considering new loans. And it signals to the financial world that you have unresolved federal tax debt.

The IRS generally files an NFTL when the unpaid balance exceeds $10,000, though the threshold can vary. Before filing, the IRS must send a Notice of Intent to File a Federal Tax Lien (Letter 3172 or equivalent), which gives you the right to request a Collection Due Process hearing within 30 days.

Lien Relief Options

There are four ways to address a federal tax lien:

Lien withdrawal. A withdrawal removes the NFTL from public record entirely, as though it was never filed. The IRS will withdraw a lien if you enter into a direct debit installment agreement and the balance is under $25,000 (individuals) or $25,000 (businesses), or if the IRS determines the filing was premature or not in accordance with IRS procedures. Withdrawal is the best outcome because it eliminates the credit impact.

Lien subordination. Subordination does not remove the lien but allows another creditor to move ahead of the IRS in priority. This is commonly used when you need to refinance a mortgage — the lender requires first-position priority, and the IRS agrees to step behind them. Subordination requires IRS Form 14134 and proof that the transaction will ultimately facilitate tax debt payment.

Lien discharge. A discharge removes the lien from a specific piece of property while leaving it attached to your other assets. This is used when you are selling a property and the buyer or title company requires clear title. The IRS will discharge a lien if the sale proceeds are sufficient to pay the tax debt or if the IRS interest in the property has no value.

Self-releasing lien. A federal tax lien automatically releases when the underlying tax debt is paid in full, the collection statute expires (generally 10 years from assessment), or the IRS accepts an offer in compromise that satisfies the liability.

Bank Levies — The 21-Day Hold Period

A bank levy is one of the most disruptive enforcement actions the IRS takes. When the IRS serves a levy on your bank (Form 668-A), the bank must freeze the funds in your account as of that date. The bank holds those funds for 21 days before sending them to the IRS. This 21-day window is your opportunity to act — and it is the only window you get.

During the 21-day hold period, we can contact the IRS to negotiate a levy release. The IRS will release a bank levy if you can demonstrate that the levy is creating an economic hardship, that you have entered into an installment agreement, that the collection period has expired, or that the levy was issued in violation of proper procedures.

A bank levy is a one-time action — it captures the funds in your account on the day the levy is served. It does not automatically reach future deposits. However, the IRS can and will issue additional levies if the underlying debt remains unresolved. The only way to stop recurring bank levies is to resolve the tax debt through a penalty abatement, installment agreement, offer in compromise, or currently-not-collectible status.

Wage Garnishments — IRS Form 668-W

Unlike a bank levy, an IRS wage garnishment is continuous. When the IRS serves Form 668-W on your employer, your employer must begin withholding a portion of each paycheck and sending it to the IRS. The garnishment continues until the tax debt is paid, the IRS releases the levy, or the collection statute expires.

The amount the IRS can take is calculated using Publication 1494, which determines your exempt amount based on filing status and number of dependents. The IRS takes everything above that exempt amount — which typically means they take 60–80% of your disposable income.

Wage garnishments can be released through the same mechanisms as bank levies: economic hardship, installment agreement, or resolution of the underlying debt. We have found that demonstrating economic hardship — showing that the garnishment prevents you from meeting basic living expenses — is often the fastest path to an emergency release.

Property Seizure — Rare but Real

The IRS has the legal authority to seize and sell real property, vehicles, and other tangible assets under IRC §6331. In practice, property seizures are rare — the IRS must follow extensive due process requirements before taking physical possession of assets, and the revenue officer must obtain supervisory approval. However, property seizure remains a real risk for taxpayers who ignore collection notices or refuse to cooperate with the IRS.

Before seizing property, the IRS must provide a Notice of Intent to Levy (Letter 1058 or LT11) at least 30 days before the seizure, giving you the right to request a Collection Due Process hearing. The IRS must also determine that the equity in the property exceeds the costs of seizure and sale, and that the seizure will not create an unreasonable economic hardship. If you have received a notice of intent to seize property, contact a tax defense attorney immediately — the 30-day CDP window is your most important deadline.

Collection Due Process (CDP) Hearings

Congress created Collection Due Process hearings under IRC §§6320 and 6330 to ensure taxpayers have a meaningful opportunity to challenge IRS collection actions before an independent officer at the IRS Office of Appeals. You have the right to a CDP hearing after receiving two types of notices:

After a Notice of Federal Tax Lien filing — the IRS sends a post-filing notice (Letter 3172) giving you 30 days to request a CDP hearing.

Before a levy or seizure — the IRS sends a Notice of Intent to Levy (Letter 1058 or LT11) giving you 30 days to request a CDP hearing.

The 30-day window is strict. If you miss it, you lose the right to a CDP hearing and can only request an equivalent hearing, which does not carry the same legal protections — most importantly, you lose the right to petition the Tax Court if you disagree with the outcome. At a CDP hearing, you can challenge the underlying liability (if you did not receive a statutory notice of deficiency), propose collection alternatives such as an installment agreement or offer in compromise, and argue that the proposed collection action is more intrusive than necessary.

Emergency Levy Release

In certain situations, the IRS acts improperly — levying before required notices are sent, levying exempt property, or continuing collection during a pending CDP hearing or offer in compromise. When the IRS violates its own procedures, you have the right to an immediate levy release.

Under IRC §6343, the IRS must release a levy if the tax is satisfied, the collection period has expired, releasing the levy will facilitate collection, the taxpayer enters into an installment agreement, or the levy creates an economic hardship. We invoke these provisions daily in our practice, and in emergency situations, we can often obtain a levy release within 24–72 hours.

Collection Alternatives That Stop Enforcement

The most effective way to stop liens and levies permanently is to resolve the underlying tax debt. The IRS offers several formal resolution programs that halt collection activity once approved:

Offer in Compromise (OIC): Settle the debt for less than the full amount owed. Once an OIC is accepted and the terms are satisfied, all liens are released and levy authority ends.

Installment Agreement (IA): Structured monthly payments prevent new levies. If you enter a direct debit installment agreement under $25,000, the IRS will also withdraw the NFTL.

Currently Not Collectible (CNC): If you genuinely cannot pay — meaning your allowable expenses equal or exceed your income — the IRS can place your account in CNC status, which halts all collection activity until your financial situation changes.

Each of these programs has specific eligibility requirements and documentation. We evaluate which path makes sense based on your financial situation, the size of the liability, and the remaining time on the collection statute. In many cases, the right resolution path not only stops current enforcement but also achieves a reduction in penalties and interest.

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