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Taxes can be complex and overwhelming. When back tax debt comes into the picture, things can get a bit more complicated and stressful. If you fail to pay your back taxes, two terms often surface: “lien” and “levy.”

These terms have specific meanings and consequences in the realm of taxation, and understanding the differences is essential for anyone seeking tax relief.

Let’s demystify these terms and explore their implications.

Note: If you’re facing threatening letters from the IRS or have a “Notice of Federal Tax Lien”, call Eric at (835) 222-6600 immediately to find what tax relief options you may qualify for.

What Is a Tax Lien?

A tax lien is a legal claim against a taxpayer’s property or assets, serving as collateral for unpaid tax debt. It is not an immediate seizure of assets but rather a legal encumbrance that alerts creditors and potential buyers that the taxpayer owes the government money. Let’s take a closer look at tax liens and what they mean.

Filing a Tax Lien:

When a taxpayer has unpaid tax debt, the IRS or state taxing authority may file a Notice of Federal Tax Lien or equivalent state document. This notice is recorded in public records, making the tax debt a matter of public record.

Impact on Credit Score:

A tax lien can have a severe impact on the taxpayer’s credit score. It can make it challenging to secure loans or credit and can result in higher interest rates on existing credit.

Asset Encumbrance:

While a tax lien does not immediately result in the seizure of assets, it encumbers the taxpayer’s property and assets.

This means that if the taxpayer tries to sell property or assets with a tax lien, the IRS or state will typically have a claim on the proceeds.

Priority Status:

Tax liens often take precedence over other creditors, including 2nd mortgage holders and other creditors. This means that the government’s claim is superior, and they have a first right to the taxpayer’s assets.

Lien Release:

A lien can be released once the tax debt is fully paid or when the taxpayer arranges an alternative payment plan with the taxing authority. It’s essential to resolve a lien promptly to regain control over your assets and credit.

What Is a Tax Levy?

A tax levy, on the other hand, involves the actual seizure of a taxpayer’s property or assets to satisfy unpaid tax debt. It represents a more aggressive collection action by the IRS or state taxing authority. Let’s review the key aspects of a tax levy.

Issuance of Levy:

A tax levy is a legal action taken by the IRS or state to collect unpaid taxes. It can result in the seizure of bank accounts, wages, vehicles, real estate, and other valuable assets.

Bank Levy:

A common form of tax levy is a bank levy, where the IRS or state taxing authority freezes and eventually withdraws funds from the taxpayer’s bank account to cover the unpaid tax debt.

Wage Garnishment:

A wage levy, or garnishment, involves continuously taking a portion of the taxpayer’s wages or salary (up to 90% of their net pay in certain situations) directly from their employer to satisfy the tax debt. This can have a significant impact on the taxpayer’s income.

Asset Seizure:

In extreme cases, the IRS or state can seize and auction off the taxpayer’s assets, including real estate, vehicles, or personal property, to recover the unpaid taxes.

Levy Release:

To release a levy, the taxpayer must address the tax debt by either paying it in full, arranging a payment plan, filing delinquent tax returns or demonstrating that the levy is causing severe financial hardship. Once the issue is resolved, the taxing authority will release the levy.

If you find yourself dealing with tax liens, levies, or other tax-related challenges, contact Eric at (835) 222-6600 today to help you resolve your tax issues and achieve financial stability.

Avoiding Tax Liens and Levies

The best way to avoid having to deal with tax liens and levies is to avoid them in the first place. Here are some proactive steps you can take:

1. Timely and Accurate Filings:

File your tax returns on time and ensure they are accurate. Filing extensions or incorrect information can trigger audits and tax debt.

2. Regularly Review Tax Returns:

Regularly review your tax returns, checking for errors, discrepancies, or potential red flags that might invite IRS scrutiny.

3. Pay Taxes Promptly:

Pay your taxes on time and in full. If you can’t pay, consider options like installment agreements or an offer in compromise to settle your debt.

4. Seek Professional Guidance:

Tax relief professionals like E Ten Broeck, LLC play a vital role in assisting individuals and businesses facing tax issues, from negotiating with taxing authorities to developing strategies for lien and levy resolution. If you have back tax debt today, contact us at 835 222 6600 for a free consultation.

Tony Fischer is the President of Alan Manufacturing, a Lancaster based company specializing in water purification systems.

This is a first in a series with Tony. In full disclosure to our readers I have done work for Tony on a professional basis, and he is a friend of mine now for many years. I decided to break my interviews with Tony into separate articles because I want to focus on the unique skills that Tony has developed. In this article we explore how Tony left industry and purchased a business.

Read how Tony left a secure position in a secure industry to purchase a business

There many successful career people that have always dreamed of having their own business but struggle with many of aspects leaving a career in pursuit of business ownership. Some of the thoughts people have are: “If I leave me career, I may not be able return to the industry at the same level.” ” I may lose some or all my capital. ” “My credit score may be damaged.” “I don’t know how to find the right business for me.”

Tony didn’t buy a franchise, or start a side hustle – he bought an existing company with a customer base, employees, vehicles and equipment. In a recent interview, I asked Tony how he made the transition from holding senior executive positions in financial services, (including President of a $100MM division) to an owner operator.

Eric: You had the experience of purchasing First Call Ambulance service back in 2004.  If I recall you were working in the financial services field and you had a mind to buy a business.  You did your due diligence, purchased the company, ran it as an owner operator, sold it then went back into industry for a period of time. Then you decided again to purchase another business – Alan Manufacturing located in Lancaster Pennsylvania. What did you learn for the last experience as you evaluated target businesses and did your due diligence? How did that shape your thinking?

Tony: As I was working for someone else, I was always acting and thinking like an entrepreneur.  So, I was always acting and thinking like it was my business. Trying to learn from the businesses I worked for, to see how things worked.  I intentionally worked for a small financial services company because I wanted to learn everything. I wanted to learn payroll, human resources and accounting functions because with the bigger companies I worked for you get a very narrow experience. So, I needed to find and employment opportunity that would show me the business process end to end. How to set up a legal entity, file for permits, run a payroll, pay invoices all the way down to buying equipment and managing employee benefits. I was moving myself towards running my own business as it was always on my mind, it was always something I wanted to do.

As part of working for another company I was involved in acquisitions, and evaluating the merits of those targets.  Looking at the financials and the people component. Every job I had in industry; I was on those teams.  So, I learned what was important when you make an acquisition of another company.

Tony focused on three things

I learned that it comes down to three things, the numbers piece, the people piece and the business piece.

While the metrics differ by industry, I learned that it comes down to three things, the numbers piece, the people piece and the business piece. First do the numbers make sense?  Does the acquisition price make sense? Secondly are the people ready.  You are going to inherit a team. Are they motivated? How long have they been with company? Are they well regarded in the industry? There a thousand questions surrounding the financial piece and the people piece. This is very different than starting your own company. When you start your own company, you can mold it to be what you want it to be. No people and No money, but when you are buying something, there is existing money and existing people. So, these two areas are what I really learned to focus on.

So if I had an opportunity at an existing business I was working for, I would take it on to see how it worked. Then I got the point where I said, “I think I can do this, now I have to find one.”

What business do you buy?

When I was looking for my own business to acquire, I applied this approach.  Looking at the finances and the human resources. Now the third piece I mentioned was the business itself. What business do I buy? Many people have the idea thought process “I love to do X” so I am only going to buy a business that does “X.”  But that is not always the case when you are looking to purchase a company.

Immerse yourself

“You know something, I could do this, let me see how good I am at this.”

Good opportunities do not always come in the shape you expect them to. Because people say work in the job you love, that is not always a reality.  You pick what you think you might like, because even the things you love have difficult days, and you go for it. Then you totally focus on it and you make it what you want it to be. As you learn the business and become more competent, you really get to love it.

Mike Rowe, host of the show Dirty Jobs, talks about a psychology where people who perform some of the most undesirable jobs, begin to really love what they do.  What happens [if you turn this mentality around], is they gain experience, start to get proficient at the job, soon get recognized as one of the best in the field and then begin to really love what they do.  There is a whole mental migration that happens.  This is the same thing that happens when you buy a business and immerse yourself in it.

Eliminate the businesses that are not right for you

Of course, there were certain businesses that were off my list like hospitality and food service.  Eliminate the things you don’t want to do and keep an open mind on everything else. Look at the metrics of the numbers and the people. Keep an open mind and ask “Could I learn to love this?” Does this interest me enough, is there enough there that I could become extremely competent at this and learn to love it? I would go through that mental exercise when looking at a business.

The importance of due diligence

When I was looking for a business, I had a network of brokers that would send deals my way. But when you are ready to leave your fulltime job and buy a business but you have to be invested the business you are buying. Businesses just do not run themselves. If you are not there, the business that you had purchased will fall apart in a short period of time.

That is what your due diligence is about, I had to make certain that this company could make money after the acquisition . There is a lot that goes into that.  You have to interview employees and customers. Your employees are not just going run the company. So, you have to be an owner/operator. You have to have your hand it without being overbearing.  You also have to set it up for the long term for an exit. With First Call, the financials looked good, and it was health care industry. I had family in Health Care, and I could really learn to really like this. I don’t know anything about it.  But it was interesting enough to me, so I bought the company.

Investing capital and managing people

The location had a lot to with the available pool of talent I had to choose from. It was more employees than I ever wanted I was up to 35 at one time. And I didn’t have an infrastructure like an H.R. Department or operations people. We had a supervisor, but I ended up performing a lot of those rolls myself and that took its toll. So, you learn. And another thing I learned about that business was as an owner operator you will make a living, but you don’t really make any money until you sell it. We built it up, and doubled the revenue. So, we sold it at a premium, so in my mind, that was successful.  But a lot of hard work, I wasn’t absentee.

Eric: Thank you Tony. I want to summarize for my readers, a few key points. Tony was able to make the transition from a career person to an owner operator by adopting a mindset of a business owner while he was employed elsewhere. When he worked for large firms, he positioned himself to be on the team that evaluated acquisitions, when he worked for smaller firms he immersed himself in the operations.

Tony developed a method of evaluating companies by focusing on three metrics; finances, the team of people, and the business itself.

Estimated reading time: 7 minutes

This year 2022 I have made a commitment to this Blog. I have had as they say “fits and starts” since 2014. Back then I was lucky enough to have a talented intern from LaSalle University by the name of Alex Miller. Alex set up this WordPress platform, edited copy, and engineered recordings. In this article I will talk about the relaunch of my blog.

Encouragement from a friend to write a weekly column

Roughly five years ago, Jim Monaghan my high school friend, began a weekly Sports podcast. I have to give him credit, he gets high grades for consistently posting a quality show with quality content. Here is a link his latest show: https://www.youtube.com/watch?v=Gklr-_DYick .

In the recent years, Jim’s brother Stephen Monaghan joined the production, and now they broadcast as Sports with Mono and Mono. It is MonO instead of MonA, because their hometown friends from Oakland New Jersey tagged Jim and his brothers with the “O” back in the day. MONO it is! I learned this Monaghan trivia because Jim pointed it out in his relaunch blog article, “Rookie-Writer.” http://www.jpmsportsertainment.com/2022/01/24/rookie-writer/.

Mono plus Mono equals 41 Sportscasting Families

I googled “sportscaster brothers” and found this article identifying 40 plus sports casting families; https://tinyurl.com/2p98bp84. It is an interesting list of families, and now I am happy to say that there are 41 sportscasting families in the business.

Blood Harmony

In singing they call it “Blood Harmony.” When you watch, you will see their show has a cadence and flow that only two brothers can pull off. They do; keep things interesting, talk on a variety of subjects, and give an historical perspective. They don’t; step in front of each other, belabor a point, and don’t argue at length when they disagree with each other.

Now it is my turn to relaunch

Jim and I where on the phone trading thoughts ideas, and I said Jim if you have a blog why don’t try writing a weekly column. And a few weeks later, Jim is writing a regular column. And his response to me is in so many words, is hey Eric where is Blog and weekly column?

So here is my second weekly column. And in this column as I announce my relaunch I have decided on focusing on “lifestyle” businesses. I look forward to working with Dr. Jeffrey Alstete and his colleagues in academia to explore and refine this topic. In the coming weeks I will be reviewing their important contributions to this space.

Tell me how I can help you

I want to help my fellow brother and sister business people launch a successful endeavor.

I believe people can actually have a “life” and a good and fulfilling life if they are in business for themselves. And many of these good things are not necessarily financial or monetary, but intangible. We will explore these intangible benefits in future article.

In the meantime please email me at eric@etenentrepreneur.info with your thoughts, ideas and comments. Thank you for reading my Blog.

Eric Ten Broeck

John A. Brown has over 30 years experience as a restaurant owner.  He worked in, owned and/or managed everything from astand-alone enterprises to establishments that are part of multi-billion dollar companies.  You will quickly learn that John A. Brown cares about YOU. He cares about your safety as a patron, he cares about those employed in the industry, and he cares about those who are thinking about, or have become restaurant owners.  He now runs. Brown & Associates Restaurant Consulting, and be reached by emailbestmanager@usa.com

Edited and Produced by Alex Miller

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I had a chance to catch up with Alex Miller, lead singer of Secondary to talk about their newest release and the process that goes into being a band today. Secondary is a four piece rock band comprised of Alex Miller (Vocals/Guitar), Quin Savant (Vocals/Bass), John Nalie (Guitar), and Kevin Shishko (Drums). The Kennett Square based group is influenced by bands such as New Found Glory and Nirvana and has a unique sound which blends different elements from both the pop, rock, and grunge spectrums. Their first release, Things That Don’t Exist veiled the band in a young and cliche sound which was then catalyzed by a a year of life experience and matured the group’s sound into their latest release August. Secondary’s music can be found at secondarypa.bandcamp.com

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