Money | Debts | Financial Freedom

So, what is a tax lien. Well, a tax lien is when real or personal property is attached and used to secure the payment of unpaid taxes. Tax liens may be used for taxes owing on the asset itself or they can be used as a way of “encouraging” taxpayers to pay their delinquent income taxes.

Real estate tax liens are the most usual form of tax lien. A significant difference between real estate and personal property tax liens is that a tax lien placed against a piece of real estate will remain with the property. This means that if you purchase a house which has been attached, you will be held responsible for the tax lien if it is not detected prior to closing.

If taxes are owed on a piece of property, the mortgage lender and the home owner will be served with a notice. You should order a title search if you are considering a real property purchase. Any liens against the real property will be evident on a title search.

When a property is sold which has outstanding taxes due, any lien against the property will normally be paid from the proceeds of the sale as a portion of the closing costs. If a tax lien is not detected prior to the sale, the delinquent tax will pass to the new owner.

Sometimes mortgage holders will pay the late taxes when they receive the notice of taxes due and then will invoice the home owner for the amount paid. Mortgage holders will do this to protect their interests because a governmental tax lien outweighs the mortgage payment due to the mortgage holder.

If the mortgage holder does not automatically pay the overdue taxes, the home owner can look into several different options for getting the taxes paid. Two of these options are using an escrow account to get the back taxes paid or paying the taxes directly.

What happens if the taxes are not paid? If a tax lien is not paid within a specified timeframe, the property, real or personal, can be seized and sold to pay the back taxes.

Typically, federal procedures will dictate the process since most real property liens are federal in nature, such as liens for the payment of income tax or gift tax. If the tax lien is state mandated, the procedures will be determined by the state in which the real estate is located. To avoid this type of scenario, it is best to pay all taxes when they are due and to request a title search if you are considering a real estate purchase.

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categories: tax liens,liens,tax lien,delinquent taxes,back taxes,overdue taxes,tax,taxes,mortgage holder,mortgage lender,debt,credit,personal finance

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Tags: back taxes, Credit, Credit Info, Debt, delinquent taxes, liens, mortgage holder, Mortgage Lender, overdue taxes, Personal Finance, tax, tax lien, tax liens, taxes

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