Lien tax
A lien tax is a lien that is imposed on property from the law department in order to secure payments of taxes. Tax liens are imposed on the person who is not able to pay the taxes in time and who owns a real estate property. Tax lien can be explained in simple words. When a property owner does not pay his tax that is due on him the government places a lien on the property because of the person's inability to pay income tax. Whenever people heard about tax they are a little uneasy about it but it is not in the case with Lien tax. A lien tax may not be good for the person who has served the tax lien but it can be good for the investors to make a substantial profits. This lien can happen on two levels. It can be at federal levels or state levels depending upon where the property is in a state that collects income tax
How it works
The lien tax works on the simple concept that the property tax is secured by the government by the real estate property. That means a person has not paid his tax or his payment is in default the governing authority makes sure that it has a right to place a lien on the property on which tax is levied. Some of the particular law differs from the state to state. Some of the state permits the tax liens can be converted into a first lien on the property.
This lien can be available for sale at auctions as a tax lien certificates. If a person has placed a successful bid then the person is assured of two things. Firstly a rate of interest and the penalties that is decided by the state that the person is required to pay to release the lien or the title of the property in case the taxpayer fails to pay within the stipulated time. The tax liens are issued in form of certificates which has a face value of taxes which comes along with administrative fees and interest. Once the lien tax certificates are sold then the defaulter is required to pay back the amount of the liens along with interest accrued.
The difference between the federal tax liens and the administrative liens is that federal tax liens applies to all properties and right to property of taxpayer with certain restrictions while this may be exempted in case of administrative levy. Tax lien is like a debt that is to the government and is different than the personal level one. Or in last case the property is seized by the government.
Payment of Tax liens
Payment of tax lien can occur through the various methods adopted by the government. In first method payment can be done by direct payment from the property owner or by mortgage holder. If the property is sold to someone by the owner who is defaulter in paying property tax, then it is paid as a part of closing cost as the sale of the property proceeds.
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