People confuse these two all the time. Both are “tools” in the government’s “tool box” for collecting unpaid back tax debts: a levy is when the government, whether the IRS, or a state taxing authority, like New York state’s Department of Taxation and Finance (“DTF”), sometimes called “New York’s IRS” uses its enormous power and discretion to seize money or other assets to collect on a debt.
For example, when it freezes a bank account and then seizes the funds in it, or when it the IRS or agency orders an employer to seize (or garnish) an employee’s wages and send the money to it, the IRS, rather than pay the employee. So levying is one of the most powerful tools in the IRS’s or DTF’s tool box, and is one of the thing which makes the IRS so feared and, sometimes, hated.
A lien is a declaration that a debt exists, and can establish the priority among creditors as to which creditor gets paid first when there a re several creditors trying to collect on a debt and is crucial where there are more claims than there is money or assets to pay.