Tax Liens

Everything you need to know about tax liens

When an individual fails to pay their taxes on property, income taxes or other taxes, a federal tax lien or personal tax lien may be imposed. A tax lien is a security interest that is placed on your property to ensure that the debtor pays their taxes.

Tax liens not only put your property at risk, they can also affect your credit and any future property purchases. Whenever possible, tax liens should be avoided, and once incurred, it's important to take measures to repay them as quickly as possible.

Paying Tax Liens

When it comes to repayment, the tax lien procedure varies from state to state, but in general, there are two basic ways in which a tax lien can be repaid. These include:

  • Direct payment by property owner. If the payment is not made in a certain period of time, the asset can be foreclosed and sold.
  • Payment by the mortgage company who retains the property. The company will often pay the tax lien than demand payment from the property owner on their terms, in order to avoid losing value due to foreclosure.

Tax Liens for Sale

Selling tax liens is another way that the government may attempt to recover their losses from delinquent tax owners. The tax lien, which is made up of the owing taxes, the interest accrued and any associated sales costs, can be sold at a public auction where interested parties can bid on it.

While it may seem unusual to buy tax liens, it can be a good investment. In many states, tax liens have a much higher return rate than other types of investments. However, there are risks to buying tax liens as well. Full payment of a tax lien is usually required in a very short amount of time, so you run the risk of foreclosure if you don't meet the deadline. You also incur and are held accountable for any problems with the property itself that may surface, which can end up costing you more than you had counted on.

Finding Help on Tax Liens

Understanding the implications of a tax lien is not easy. Tax professionals and tax lawyers can help you ensure your rights are protected and that you fully understand your risks. They can also help you get tax lien relief as quickly and efficiently as possible. Similarly, if you are considering using tax liens as an investment strategy, a professional can help you understand how to protect yourself and make safe purchases.

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