How Does the IRS Prioritize Liens, Levies, and Seizures?
When a tax debt goes unpaid, the IRS has a toolbox of enforcement remedies. The agency doesn’t apply them all at once — it follows statutory procedures and practical priorities. This article explains how liens, levies, and seizures differ, the order in which the IRS typically uses them, what determines priority between creditors, and what taxpayers can do to stop or limit each action.
Quick primer: three different legal tools
- Liens: A federal tax lien is a legal claim the U.S. government has on a taxpayer’s property when tax is assessed and unpaid. The lien protects the government’s interest but does not transfer possession.
- Levies: A levy is an administrative action that allows the IRS to seize or garnish property — such as bank accounts, wages, or business assets — to satisfy tax debt.
- Seizures: Seizure refers to the IRS taking title to property and typically selling it to pay the tax debt. Seizures are rare and usually reserved for serious, unresolved cases.
(For the IRS’s step-by-step overview, see IRS, “IRS Collection Process.”) [https://www.irs.gov/businesses/small-businesses-self-employed/irs-collection-process]
Which comes first: lien or levy?
The IRS typically follows an escalating path:
- Assessment and notice. The process starts when the IRS assesses tax and mails a Notice and Demand for Payment. If the taxpayer fails to pay or file a response, the IRS can move toward lien or levy actions. (See IRS collection notices for timelines.)
- Lien as a protective claim. A federal tax lien arises by operation of law when tax is assessed and unpaid and a notice of intent to levy is issued. The lien becomes public and more enforceable when the IRS files a Notice of Federal Tax Lien (NFTL) in county or state records. Filing gives notice to other creditors and can affect title transfers and financing.
- Levy to collect current funds. If collection efforts fail, the IRS may issue a levy to seize assets or garnish wages. Levies are the IRS’s primary tool to collect readily available assets.
- Seizure as last resort. A seizure (an IRS sale of property) typically follows an unsuccessful lien and levy process and is used when other collection methods don’t resolve the debt.
This escalation is practical: liens reserve the government’s claim while levies and seizures produce immediate cash to satisfy the debt.
How priority is determined among liens and other creditors
Priority between competing claims generally follows the basic rule “first in time, first in right.” For tax liens:
- The federal tax lien attaches to property as of the date of assessment. However, an NFTL filing creates public notice that affects subsequent creditors and purchasers.
- Creditors who record an interest in property before the IRS files the NFTL often have priority over the IRS lien. Conversely, creditors who act after the NFTL filing are typically subject to the tax lien.
Statutes and court decisions add nuance, and some purchasers or secured creditors may have statutory protections. Because state recording rules and timing matter, the NFTL’s filing date often determines whether the IRS’s lien takes priority over other liens.
For a practical guide to fixing or subordinating liens, see FinHelp’s article on Resolving Tax Liens: Removal, Withdrawal, and Subordination.
Levies: timing, notice, and taxpayer rights
Before a levy, the IRS must generally do three things:
- Send a Notice and Demand for Payment.
- Send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before the levy action.
- Give the taxpayer the opportunity to request a Collection Due Process (CDP) hearing or to contact the IRS about payment options.
If you receive a Notice of Intent to Levy, you have 30 days to request a CDP hearing by filing Form 12153 (Collection Due Process or Equivalent Hearing Request). A timely request can stop the levy while the hearing is pending. (IRS: “Levy” pages and CDP procedures.)
Levies are fast and can hit bank accounts and paychecks. For example, a levy on a bank account becomes effective when the bank receives the IRS notice and is typically turned over to the IRS after the statutory hold period. Because levies take actual possession (or the right to possession) of assets, they are prioritized in IRS operations when immediate collection is feasible.
Seizures: when the IRS takes and sells property
Seizure is the transfer of ownership (or control) of property to the IRS for sale to satisfy tax debt. The IRS generally pursues seizure only after other remedies fail or when the taxpayer has significant nonexempt assets and won’t cooperate. In practice, seizing and selling property requires additional procedural steps and supervision; the agency tends to prefer levies for quicker collection.
Seizure of certain properties (and selling a primary residence) involves extra legal steps and oversight. Because seizing homes or essential personal property raises significant hardship and public-policy concerns, seizures are uncommon and often avoidable with timely action.
Exemptions and limitations the IRS must follow
Not all property is subject to levy or seizure. Federal law and IRS guidance identify exempt property (for example, certain unemployment benefits, some support payments, and a portion of wages). The IRS also evaluates hardship and may release a levy when collection would create an undue financial burden.
For current lists and specifics, consult IRS guidance on property exempt from levy and your rights in collections. (See IRS publication and topic pages on levies and exemptions.)
Practical prioritization: what the IRS looks for first
The IRS prioritizes actions that are least costly and fastest to administer: wage garnishments and bank levies are common because they quickly produce funds. Liens are used early to protect the government’s interest in property and to preserve collection options. Seizures are a last-resort enforcement tool because they are administratively intensive and often litigated.
In short: secure the claim (lien) → take readily available funds (levy) → sell property (seizure).
What taxpayers should do immediately
- Don’t ignore notices. Early response prevents escalation.
- Verify the notice. Scams mimic IRS threats. Confirm using IRS contact information on IRS.gov.
- Request a hearing. File Form 12153 for a timely Collection Due Process hearing if you get a Notice of Intent to Levy.
- Explore payment alternatives. Installment agreements and Offers in Compromise are common solutions; the IRS Fresh Start program expanded installment options that can help avoid liens in many cases. See FinHelp’s guide: How to Use the IRS Fresh Start Installment Agreement to Avoid a Lien.
- Consider an Offer in Compromise if you cannot pay in full. Learn about evaluation and documentation in Offers in Compromise: Understanding the Evaluation Process and Documentation Needed.
Common mistakes I see in practice
- Waiting too long. Tax collection timelines move faster than taxpayers expect. Missing the 30-day window to request a CDP hearing can remove a key appeal right.
- Relying on incomplete promises. Verbal assurances from IRS call agents don’t substitute for filed agreements or written confirmations.
- Forgetting to address state tax liens. State-level filings can complicate priority and resolution.
In my practice, timely engagement — requesting a hearing, proposing an installment plan, or submitting an Offer in Compromise — prevented levies and avoided a threatened seizure in most cases.
Frequently asked questions
Q: Can the IRS take my tax refund for unpaid prior-year taxes?
A: Yes. The IRS can apply refunds to outstanding federal tax liabilities. Also, certain levies and offsets can occur when you have unpaid federal taxes.
Q: If the IRS files a Notice of Federal Tax Lien, will I lose my home immediately?
A: No. A lien is a claim, not immediate ownership transfer. However, it can complicate selling or refinancing the property. Only a levy/seizure (or a court foreclosure under state law) leads to loss of possession.
Q: How long does an NFTL stay on record?
A: A federal tax lien generally lasts 10 years from assessment, but it can be extended. The NFTL filing remains public unless released, withdrawn, or otherwise satisfied.
Resources and authoritative references
- IRS, “The Collection Process.” https://www.irs.gov/businesses/small-businesses-self-employed/irs-collection-process
- IRS, “Levy” and “Notice of Federal Tax Lien” pages (search IRS.gov for current procedural pages and forms such as Form 12153).
- U.S. Department of the Treasury, “Taxpayer Bill of Rights.” https://home.treasury.gov/
Final professional tips
- Act early and document everything. A single timely Form 12153 or installment request can halt a levy and preserve options.
- Use specialist help when debts are complex. Enrolled agents, CPAs, and tax attorneys understand nuances of lien priority and can negotiate lien withdrawals, subordination, or releases.
- Keep records of communications and confirmations from the IRS.
Professional disclaimer: This article is educational and reflects industry-standard guidance and my professional experience. It does not replace personalized legal or tax advice. For decisions affecting your tax liabilities, consult a qualified tax professional or attorney.
(Last reviewed 2025. For the latest IRS procedures and forms, always check IRS.gov.)
