When a tax lien is thrust upon you what are you to do? What happens in this situation? What is a tax lien? Many people understand the basic concept of a home foreclosure due a delinquency on mortgage payments, but many people are not aware of what can happen when property and income taxes are failed to be paid. In such a startling and dire situation what can what expect?
If you fail to pay your taxes, be they on real property or income the government works hard to get that money from you. They send you notices to try and get your attention and to get you to contact them when you are delinquent on your payments. When this doesn’t work they have no choice but to put a tax lien on your property. This lien makes it so that legally you cannot transfer the title of your property or offer it as collateral until the debts have been paid off.
If the property that is having a tax lien attached to it is financed then the mortgage company can pay the taxes. They will often due this to avoid a high risk situation. When a tax lien is on a property that they have loaned money on these companies risk losing them should a tax foreclosure take place.
When lenders offer this option they require back payments for what they have paid. They set up an escrow account that generally becomes attached to the mortgage payment. The owner is then responsible for a monthly back payment and a payment that goes towards the coming year as well. Most tax lien properties are not financed and in those instances owners should be putting away money each month to save for the lump sum tax payments due each year.
A tax lien is not limited to the failure to pay property taxes. When income taxes aren’t paid the government also has the right to seize your property. In order to avoid this problem a simple visit with an accountant can help you learn how to manage your money and figure out how much money should be taken out of each paycheck to avoid needing to make a lump sum payment each April.
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.
Learn more about Tax Lien investing. Stop by No Risk Investor where you can find out all about Tax Lien and how you can profit by them.
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