The last thing anyone wants to find in their mailbox is a tax lien! Why? Well, to answer that question, you have to first understand exactly what a tax lien is. In the most basic terms, receiving a tax lien is the direct result of failing to pay taxes on a personal asset, such as your home. Therefore, the primary reason you want to avoid tax debt and the consequence of receiving a tax lien is to stay out of trouble with the Internal Revenue Service, commonly referred to as the IRS.
Types of Tax Liens
There are several different types of tax liens, including property tax liens and federal tax liens that are caused from different types of tax debt. In the case of property tax liens, if you are a property owner who fails to pay the property tax you are responsible for, the government has the legal right to place a lien against your property for unpaid income taxes. With property or real estate tax liens, the property in question can still be put up for auction even if you’re in the process of contesting the tax or charge. However, bear in the mind that the sale of your property can only go through if your real estate tax lien remains unpaid for the legally permitted length of time. In order to avoid property tax liens, you have to pay all the incurred charges on your property.
On the other hand, a federal tax lien is a lien that is attached to property for nonpayment of a federal tax. A federal tax lien provides the basis for the IRS to foreclose on your assets by performing a seizure. However the IRS Reform Act of 1998 has greatly helped to significantly reduce the amount of seizures conducted by IRS Revenue Officers. Most of the time, if not filed, a federal tax lien can be avoided by negotiating an Installment Payment Agreement with the IRS. Once filed however, it is not released until the IRS tax debt is settled, excluding any special circumstances. While you do have the option to appeal a federal tax lien that is imposed upon you, keep in mind that you must put fourth a good case in order to succeed and prove that you are capable of repaying the IRS tax debt in a timely manner.
Rules & Regulations
There are some things you need to be aware of when it comes to the issuer of a tax lien. For example, if the tax lien is issued by a local “municipality” in the form of a city tax lien, state tax lien or county tax lien, it will pertain only to the item in question, which may include things such as your real estate property, automobile, boat, etc.
On the other hand, if you are issued a tax lien by the federal government, it can apply to each and everything you own. The reality of the matter is that the “Feds” have the power to take it all and sell it. You may often see proof of this in certain ads that come out in the newspaper promoting items such as cars and homes for incredibly low prices.
Paying Tax Liens
When it comes down to it, it doesn’t really matter who the issuer of a tax lien is. Ultimately, you have to pay back the taxes you owe and pay them fast if you intend to hold on to the item in question. So what happens if you fail to pay? Failure to pay your tax lien results in the lien being sold at a public auction. You should also remember that when your tax lien is sold, you will have the added financial burden of paying the lien holder interest in addition to the taxes. In the end, the only way to really avoid IRS tax debt is to pay the tax lien you are liable for and pay it on time.