What is a federal tax lien and how does it differ from a tax levy?

A federal tax lien and a tax levy are two different IRS collection tools that are often confused. A tax lien is a legal claim against your property that secures the government's interest in your assets. It does not take your property but gives the IRS a legal right to it. A tax lien attaches to all your current and future assets, including real estate, vehicles, bank accounts, and business property. A tax levy, on the other hand, is the actual seizure of your property. The IRS takes your wages, bank funds, or other assets to satisfy the tax debt. Think of it this way: a lien is the IRS putting a 'hold' on your assets; a levy is the IRS actually taking them. The IRS automatically creates a lien when you owe taxes and don't pay after the first notice. The Notice of Federal Tax Lien (NFTL) is a public filing that alerts creditors that the IRS has a claim on your property. This public filing is what damages your credit and ability to sell property or get loans.