When your business owes back taxes, the IRS has extraordinary powers to collect — including the right to lien your property and levy (seize) your assets. A tax lien is the government’s legal claim against your business property, while a levy is the actual taking of your funds or assets. Both can devastate your company’s credit, cash flow, and reputation if not handled swiftly. Fortunately, there are legal pathways to remove, withdraw, or prevent liens and levies — often without closing your business — but you need to act before enforcement escalates.
Tax Lien vs. Tax Levy: Know the Difference
| Action | What It Is | What It Does |
|---|---|---|
| Tax Lien | A public legal claim against property for unpaid taxes. | Impacts credit, blocks asset sales, etc. |
| Tax Levy | The physical seizure of bank accounts, receivables, or property. | Drains cash flow, freezes operations, may seize assets. |
💡 Tip: The lien protects the IRS’s claim; the levy enforces it.
How a Business Tax Lien Works?
The IRS files a Notice of Federal Tax Lien (NFTL) after:
- Assessing the tax,
- Sending Notices and Demand for Payment, and
- Receiving no timely response or payment.
Once filed, the lien becomes public record (affecting credit and financing).
💡 Note: A lien does not mean immediate asset seizure — but it is the IRS’s way of “claim” on your business property.
How a Business Tax Levy Happens?
A levy is far more severe. It’s the actual seizure of assets. Before a levy, the IRS must send you notices and demand for payment.
Timeline of IRS Enforcement
| Stage | IRS Action |
|---|---|
| Balance Due (CP14) | Notice of unpaid tax. |
| Reminder Notices (CP501/CP503) | Remainder of unpaid taxes. |
| Final Notice (CP504) | Intent to levy and lien warning. |
| NFTL Filed (Letter 3172) | Public lien recorded with county/state. |
| LT11 or Letter 1058 | Final notice before levy. |
| Levy Execution | Bank accounts, receivables, or wages seized. |
📘 Reference: Understanding your IRS notice or letter
How to Resolve a Business Tax Lien?
Full Payment (Lien Release)
Paying your balance in full is the fastest way to remove a lien. Within 30 days of full payment, the IRS must release the lien.
📘 Reference: Publication 1450 — Lien Release
Lien Withdrawal
If you’ve entered a payment plan or met specific compliance conditions, you may qualify for withdrawal — complete removal of the lien from public record.
You May Qualify If:
- You entered a Direct Debit Installment Agreement (DDIA) for balances under $25,000.
- You’ve made three consecutive payments.
- All returns are filed and current.
📘 Reference: Form 12277 — Application for Withdrawal of Filed NFTL
Subordination or Discharge
| Action | Purpose | When Used |
|---|---|---|
| Discharge | Removes the lien from a specific property. | Selling property or refinancing to pay tax debt. |
| Subordination | Allows another creditor (like a bank) to take priority. | To secure financing that can help pay your IRS debt. |
💡 Insight: These tools are critical for refinancing or business sales — but approval requires IRS legal review and documentation that benefits both parties.
📘 Reference: Publication 783 — Discharge of Property from Federal Tax Lien
📘 Reference: Publication 784 — Subordination of Federal Tax Lien
How to Resolve a Business Tax Levy?
Request Levy Release
If the levy is causing economic hardship, the IRS must release it.
Negotiate a Payment Plan or Settlement
You can stop enforcement by arranging one of the following:
- Installment Agreement — Structured monthly payments.
- Offer in Compromise — Settles for less than owed.
File a Collection Due Process (CDP) Appeal
If you received Letter 1058 or LT11, you have 30 days to file Form 12153 and stop the levy. This request pauses enforcement and brings your case before an IRS Appeals Officer — not a collection agent.
📘 Reference: Form 12153 — Request for CDP Hearing
Why Legal Representation Matters?
Liens and levies are legal actions — not mere administrative issues. An experienced tax attorney can:
- Stop levies through appeal or negotiation.
- Secure lien releases or withdrawals under IRS standards.
- Negotiate payment or settlement agreements before enforcement.
- Represent you in Collection Due Process (CDP) hearings.
- Protect personal assets from Trust Fund Recovery Penalty exposure.
📘 Reference: Form 2848 — Power of Attorney
Need help with a similar issue? Contact our firm today for a consultation.
If your business is facing a tax lien or levy, time is not your ally — but the situation is fixable. The IRS offers structured legal remedies, but success depends on prompt and strategic action. A tax attorney can stop collection, negotiate settlements, and restore your business’s financial standing.
Contact Pelham PLLC today for a confidential consultation. We help business owners release liens, lift levies, and prevent future enforcement actions while protecting both business and personal assets.
FAQs
Can a lien or levy affect my business credit?
Yes. Liens are public records and appear on commercial credit reports, reducing lending options.
Can I sell my business if there’s a tax lien?
Yes, but you must apply for a discharge or subordination first to transfer clear title.
