IRS Tax Lien & Levy Relief

IRS Lien vs. IRS Levy: Key Difference

These two terms are frequently confused. A federal tax lien is a legal claim against your property — it attaches to all your assets (real estate, financial accounts, personal property) and is recorded publicly, damaging your credit and making it difficult to sell or refinance property. A tax levy is the actual seizure of property — the IRS taking money directly from your bank account, garnishing your wages, or seizing physical assets. A lien is a warning; a levy is the action. Both require immediate professional response.

Federal Tax Lien: What It Does to You

The IRS files a Notice of Federal Tax Lien (NFTL) after: (1) assessing a tax liability, (2) sending a demand for payment, and (3) the taxpayer failing to pay within 10 days. Once filed, the lien is public record — it appears in county recorder records and on your credit report. It attaches to all current and future assets, including real estate you acquire after the lien is filed. For California homeowners, a federal tax lien can prevent refinancing or selling a home until the lien is resolved.

The IRS will not file a lien for balances under $10,000. For balances between $10,000 and $25,000, the IRS may agree not to file a lien if you enter into a direct debit installment agreement. For balances over $25,000, lien filing is standard procedure.

How to Get a Lien Released or Withdrawn

KDA's recommendation: Lien withdrawal (not just release) is almost always preferable because it removes the lien from public record entirely. The IRS will grant withdrawal for balances under $25,000 with a direct debit installment agreement after three consecutive payments — KDA pursues this proactively for every eligible client.

IRS Levy: Bank Accounts & Wage Garnishment

Before levying, the IRS must send a Final Notice of Intent to Levy (Letter 1058 or LT11) and give you 30 days to request a Collection Due Process (CDP) hearing. If you do not respond within 30 days, the IRS can levy your bank accounts (taking the entire balance on the day of the levy), garnish your wages (taking a significant portion of each paycheck until the balance is paid), and seize other assets including vehicles, business assets, and — in extreme cases — real estate.

A bank levy is a one-time seizure of the balance on the day the levy is served. A wage garnishment is continuous until the balance is paid or the garnishment is released. The IRS uses an exemption table to calculate how much of your wages are exempt from garnishment — for a single taxpayer claiming one exemption, the exempt amount is approximately $1,000 per week. Everything above that amount goes to the IRS.

How to Stop or Release an IRS Levy

The fastest way to stop a levy is to request a Collection Due Process (CDP) hearing within 30 days of the Final Notice. Filing a CDP request immediately suspends levy action while the hearing is pending. If the 30-day window has passed, KDA can still request a levy release by: entering into an installment agreement, submitting an OIC, demonstrating that the levy is causing economic hardship, or showing that the levy is preventing you from paying basic living expenses. The IRS is required by law to release a levy that is creating economic hardship.

California FTB Liens & Levies

The FTB files state tax liens and issues levies independently of the IRS. California state tax liens are filed with the county recorder and the Secretary of State. The FTB can levy bank accounts and garnish wages without going through the same pre-levy notice process as the IRS — California law gives the FTB broader levy authority. KDA represents taxpayers before the FTB's Collection Division and negotiates lien releases and levy releases simultaneously with IRS resolution when both agencies are involved.

IRS Collection Timeline

Understanding the IRS collection sequence helps you know how much time you have to act:

1. Tax assessed — IRS sends CP14 (first balance due notice)
2. 30 days — CP501 (reminder notice)
3. 30 days — CP503 (second reminder)
4. 30 days — CP504 (final notice; FTB notified)
5. 30 days — Letter 1058/LT11 (Final Notice of Intent to Levy; CDP rights triggered)
6. 30 days — CDP hearing window closes; levy action can begin
7. Levy served — bank account seized or wage garnishment begins

Total time from first notice to levy: approximately 5–6 months if you ignore every notice. KDA recommends responding at the CP14 stage — before the situation escalates to levy action.