A tax lien is a way to secure tax debt should the tax amount owed go unpaid over time. It can be filed by the IRS for a federal tax debt or the state may file the tax lien in lieu of payments to state tax debt. There are two ways a tax lien is filed, it is either placed on a physical, tangible asset or on an entity's credit report (individual's or business's)
Tax Lien on Physical Assets
The IRS (or state) may place a tax lien on a home that you own. It can be any type of ownership (homestead, second home, rental property, etc.) and allows for a more difficult transaction when selling or refinancing the property.
Tax Lien on Credit Report
If you do not own property the IRS can still hurt you by filing a lien on your credit report. This lowers your credit score and makes it difficult for any type of credit approval. Can become main factor preventing a taxpayer from buying a home.
An IRS levy is a legal seizure of your property to satisfy a debt. Unlike a lien, the levy exchanges ownership immediately from you to the IRS. A levy can occur many different ways.
Bank Account Levy
A certain amount of money, determined by the state or IRS, will be withdrawn from your account at random with no idea when it will occur again. The account may be any type of account (checking, savings, etc.) and cannot be taken back at any point in the future unless procedural errors were primary cause for the withdrawal.
Paycheck / Social Security Income
A levy on an individual's paycheck or social security income is commonly referred to as a wage garnishment or social security garnishment. The state or IRS takes specific amounts each check or deposit and applies the amount towards the tax debt owed to them. They use a table to determine the amount to take regardless of unique circumstances a taxpayer is in.