I'm writing to you from Old Saybrook, Connecticut, where we're pretty much trapped.

A nor'easter is hammering the coast. Liz and I came out here to watch our daughter play at MIT in Boston, but the storm canceled the game.

So instead we're sitting inside watching the wind rip trees apart and pull down power lines.

Fortunately, we still have power.

While the storm was going on, an email came in from a scared client.

He had done everything right. We got his account placed in Currently Not Collectible hardship status, so he doesn't have to make payments to the IRS right now.

That was a win.

Then a Notice of Federal Tax Lien showed up in his mailbox, and he thought the IRS was coming for everything he owned.

It isn't.

He had mixed up two words that sound alike but mean very different things: lien and levy.

Almost everyone I talk to mixes them up, so let's clear it up.

A levy is the IRS taking your money. 

It can pull funds from your bank account, garnish your paycheck, or seize property. A levy is the one to fear, and it's what a good resolution protects you from.

A lien is a public record that says you owe. 

It doesn't take a dime. It protects the government's claim if you sell or borrow against property. Think of it as a flag planted on your file, not someone reaching into your wallet.

Here's what most people don't know:

• A lien can be filed even after your case is resolved. When the IRS puts a balance into hardship status, filing a lien is routine. It is standard procedure, not a punishment and not a sign the deal fell apart.

• Installment agreements can come with a lien too. Depending on how much you owe and what kind of plan you're on, you may still file a lien while you make every payment on time.

• A tax lien won't show up on your credit report. The major credit bureaus stopped reporting tax liens in 2018, so your score doesn't take the hit.

• Real estate matters most. If you own a home, the lien attaches to it and has to be dealt with before you can sell or refinance. That's also true of other significant assets you try to sell or finance.

• Lenders can still find it. A mortgage lender running a public-records search will see the lien, so plan ahead before you apply for a big loan.

So if you're in hardship status or on a payment plan and a lien notice arrives, don't panic.

The protection is still in place. As long as you stay compliant by filing on time and not piling up a new balance, the IRS isn't coming after your bank account or your paycheck.

It's a lot like the storm outside my window. The wind is loud, and the trees are coming down, but the house is standing.

Now for the part that should worry you. 

If you owe the IRS and you don't have an arrangement in place, then a lien isn't the end of the story. It's the warning shot.

After that come notices of intent to levy, and after those come frozen bank accounts with no warning and paychecks cut before you ever see them.

Every month you wait, penalties and interest keep adding to the balance, and your options get narrower.

The lien isn't the thing to fear. Doing nothing is.

If you've received an IRS letter and you're not sure whether it's a lien, a levy, or something worse, call my office at 909-570-1103 or book appointment at CallTaxEA.com

We'll tell you exactly what you're looking at and what comes next.

Stay dry,

Carlos Samaniego, EA
The Tax Debt Detective
Tax Debt Consultants