An Unexpected Tax Lien
A tax lien can be a most dreadful source of unhappiness in one's life. A simple review of what a tax lien is can certainly help to clear the air and create a happier balance though. Once one understands a tax lien they can better weather the stormy economic seas of our time.
When you fail to make your tax payments on time the IRS starts to send you notices. If you fail to respond to these notices and work things out with them, or in other words starts making some progress on your back due taxes, they can put a tax lien on your home. This tax lien prevents you from being able to offer the property as collateral for financing or from transferring the lien on the property to another individual. The tax lien will then remain in place until the debt has been completely paid off.
When properties that have a tax lien placed on them, or are about to, are financed through a lender the government will attempt to contact them as well. Most often these lenders will foot the bill to avoid the tax lien and the high risk that accompanies their loan if in fact that tax lien is successfully attached to the property.
After paying off the taxes the lenders require back payments through the use of an escrow account. These accounts can help prevent the attachment of a tax lien to your property, because they ensure that a monthly amount of your mortgage payment goes towards paying off the taxes at the end of the year. Those whose homes are not financed would be wise to put away to find an average figure to save each month so that their taxes are not such a huge hit on their monthly budgeting when they get their tax bill.
When people don't pay their income taxes the government also has the right to seize their property. They start by placing an ordinary tax lien on the property and then if needed can continue on by selling the property at a tax deed auction or by selling a tax lien certificate to investors.
Avoid a tax lien like you would he plague by preparing ahead of time and understanding what can cause you to get a tax lien in the first place. By doing this there will be no lump sum payment surprises and you will be debt and tax lien free in any economy.
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