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 What Is the Difference Between a Lien and a Levy

Many property owners go to a Maryland tax lien attorney for one of two reasons. There’s either a lien placed on their properties, or they have received a levy notice from the Internal Revenue Service (IRS).

Most of the time, property owners get these two mixed up. It’s understandable; levies and liens have the same purpose — to collect outstanding taxes from delinquent taxpayers.

However, despite the functions both serve, they are worlds apart from each other. We’re here to help you tell them apart, so you’ll know what to expect when you see a Maryland tax lien attorney.

Read on to learn the difference between liens and levies and see what you can do if you receive a notice of either.

Lien: Using Your Property as Collateral

A lien is a tax-collection instrument that uses an owner’s real estate property as an assurance of payment. In other words, if there’s a lien on a property, the property is collateral until the debtor pays all taxes. Here’s how a lien works in greater detail.

For the creditor to get money, there has to be some sort of assurance that binds the debtor — collateral. In the case of a lien, the property owner’s real estate asset (typically the home) becomes the collateral. As a result, the owner must pay any outstanding taxes.

Because the property is on a lien, the owner cannot perform several transactions with it. For instance, a property owner cannot sell the property. If the property is a rental apartment or house, the owner cannot rent it out. In rare cases, owners may still rent the property out, but the rent money will go to the county or IRS.

Levy: Lawful Seizure of a Property

If a taxpayer fails to pay taxes, the IRS may legally seize property. This seizure is a levy.

A levy allows the IRS to seize property as payment for outstanding taxes. Usually, the IRS only sends a levy notice after a taxpayer fails to recover the property on a lien.

The IRS deliberates other options before considering a property seizure. Once the IRS determines a due cause, it sends due notice 30 days before the levy goes into effect. Within this period, the IRS grants taxpayers a right to a hearing to appeal or defer the levy.

Levy or Lien, Call a Maryland Tax Lien Attorney

In summary, a lien places your property as collateral until you pay back any outstanding taxes. By contrast, a levy allows the IRS to seize your property if you fail to fulfill your tax obligations.

Both are tax collection methods that can leave you with little to no rights over your property in Maryland. If you receive a lien or levy notice, you’ll need help. Call us now at LewisMcDaniels and get representation and guidance for your lien or levy case in Maryland.

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