A lien and a levy are different things, and the difference decides what to do. A lien is a claim. It attaches to everything you own and follows the property, but it takes nothing by itself. A levy is a seizure. It takes money out of a paycheck or a bank account, and it is the one that demands immediate action.
Both are governed by notice requirements, deadlines, and relief procedures that the agencies follow precisely and that most taxpayers never learn until the money is gone. This article follows them in the order they progress, for the IRS and the Franchise Tax Board.
The Notices
Recognizing the sequence of letters, and the one that matters most.
The IRS
After a balance is assessed, the IRS sends a series of balance-due notices, each more insistent than the last. Two of them carry legal consequences. The notice of federal tax lien filing tells you a lien has been recorded and gives you 30 days to request a hearing. The final notice of intent to levy, which arrives by certified mail, gives you 30 days to request a hearing before any levy can issue. The final notice is the one that must never be ignored.
The FTB
The FTB’s sequence is shorter and faster. A notice of balance due is followed by a final notice before levy, and after that the FTB will issue an earnings withholding order to an employer or an order to withhold to a bank with little further warning.
Taking over
With a power of attorney on file, we receive copies of the notices and can act on the deadlines. Many levies happen simply because the taxpayer moved, the notices went to an old address, and no one saw the final one.
The Lien
Understanding what a recorded lien does and does not do.
How it arises
A federal tax lien exists by law once tax is assessed, a demand is sent, and the balance is not paid. What most people mean by a lien is the public notice of it, recorded with the county recorder and, for businesses, with the Secretary of State. The IRS generally files that notice when a balance passes its filing threshold. The FTB records its own liens in the same places.
What it does
A recorded lien attaches to real estate, vehicles, business assets, and property you acquire later. It must be dealt with before a home can be sold or refinanced, and lenders see it in a title search. Since 2018 the credit bureaus have not reported tax liens, so the effect is on transactions rather than on credit scores.
What it does not do
Generally, a lien takes nothing. You keep living in the house and driving the car. The lien waits for a sale, a refinance, or the agency’s decision to levy.
The Levy
Knowing how each kind of levy works, because each is released differently.
Wage levies
An IRS wage levy is continuous. The employer withholds from every paycheck until the levy is released, leaving the employee only an exempt amount based on filing status and dependents. An FTB earnings withholding order takes a fixed share of disposable earnings, also continuously. As a rule, the FTB modifies its orders to a plan amount rather than releasing them; only an approved hardship finding or a bankruptcy filing stops one outright.
Bank levies
A bank levy is a one-time seizure of whatever is in the account on the day it is served. The IRS gives the bank a 21-day holding period before the money is sent, which is the window for getting it released. The FTB’s order to withhold has a shorter hold. Money deposited after the levy date is not taken unless a new levy is served.
Other levies
Both agencies can levy accounts receivable, retirement accounts in some circumstances, and state tax refunds. The IRS can also take a portion of Social Security benefits through its automated program. Each has its own exemptions and its own path to release.
Relief
Matching the remedy to the problem: release, withdrawal, discharge, subordination, or hardship.
Releasing a levy
The IRS must release a levy when the tax is paid, when the collection period has expired, when a payment plan is approved, or when the levy is creating an economic hardship that leaves you unable to meet basic living expenses. A pending offer in compromise also generally stops levies. In practice the release comes from one of two routes: an approved payment plan, or a documented hardship that places the account on hold. We decide which route on the first call, because the bank’s holding period is short.
Releasing a lien
A lien is released within 30 days after the balance is paid in full, settled through an accepted offer, or expires. Release leaves the recorded notice in the public record, marked as released.
Withdrawing a lien
Withdrawal removes the notice as if it had never been filed. The IRS will withdraw a lien when it was filed in error, when the taxpayer enters a direct debit payment plan within the IRS’s limits and has made several payments, or when withdrawal will help the taxpayer pay. It is requested on a specific form, and it is the remedy to ask for when the lien is blocking a loan that would be used to pay the tax.
Discharge and subordination
A discharge removes the lien from one specific piece of property so that it can be sold, usually with the IRS taking its share of the proceeds. A subordination lets a new lender step ahead of the lien so that a refinance can close. Both are applied for in advance with the sale or loan documents, and both take weeks, so a pending escrow is the time to start, not the week before closing.
Hearings and Appeals
Using the hearing right the notices give you.
Collection due process
The 30-day window on the lien notice and the final levy notice is the window to request a collection due process hearing. A timely request stops the levy while the hearing is pending and takes the case to the Independent Office of Appeals, where the taxpayer can propose a payment plan, an offer, or hardship status, and challenge the levy as more intrusive than necessary. An adverse decision can be taken to the Tax Court.
After the deadline
A request filed late becomes an equivalent hearing. Appeals still considers it, but the levy is not automatically stopped and there is no court review afterward. The difference between the two is the reason the final notice must be opened the day it arrives.
The FTB
The FTB does not have an equivalent of the collection due process hearing. Relief from an FTB levy comes through a payment plan, a hardship request, or, where the underlying assessment is wrong, a claim that the tax itself is not owed.
IRS and FTB Compared
| Topic | IRS | Franchise Tax Board |
|---|---|---|
| Warning before levy | Final notice by certified mail; 30 days to request a hearing. | Final notice before levy; no hearing right. |
| Wage levy | Continuous; released on plan, hardship, payment, or expiration. | Continuous; modified to a plan amount; released only on hardship or bankruptcy. |
| Bank levy | 21-day hold before funds are sent. | Shorter hold. |
| Lien remedies | Release, withdrawal, discharge, subordination. | Release on payment; partial release for a sale on request. |
What It Costs
A levy release is usually a flat-fee engagement, because the work is concentrated in the first days. Lien withdrawals, discharges, and subordinations are quoted per application. A collection due process hearing is billed by the hour. We tell you the fee before any work begins, and in a levy case we tell you on the first call.
- Every notice, especially any final notice of intent to levy, with its envelope
- Any levy or garnishment paperwork from your employer or bank
- The recorded lien notice, if you have it
- Recent pay stubs and bank statements
- Sale or loan documents, if a transaction is pending
Gregory Grigoryants is a California attorney (State Bar No. 286804) who has represented individuals, families, and business owners in bankruptcy, debt collection defense, and tax resolution matters for more than 13 years. He practices from offices in Sherman Oaks and Beverly Hills and speaks English and Russian.