A tax lien is a legal claim made by the Internal Revenue Service (IRS) against a taxpayer’s assets when they fail to pay their income taxes. Tax liens give the government the right to collect any money owed by the taxpayer by seizing their property or funds. This includes their home, vehicle, bank accounts, wages, and other assets. Tax liens are usually a last resort for the IRS and are only issued after other collection efforts have failed.
Businesses can also have tax liens placed against their property and unpaid business taxes. The amount of the lien is generally the delinquent taxes owed plus interest and any other fees. The IRS may also sell the lien to the public to collect money to make up for the unpaid taxes owed.
It is important to note that a tax lien does not automatically result in the seizure and sale of the property. However, the lien ensures that the tax authority has the first claim to the property before any other creditors, such as credit card companies, can claim it.
Tax lien sales are a form of property tax sale where the government sells the lien to the highest bidder to collect the unpaid property taxes. In contrast, a tax deed sale involves the actual property being sold to the highest bidder, with the title passing to the new owner.
How Do Tax Lien Sales Proceed?
Tax lien sales have evolved to primarily online platforms, with more buyers shopping and purchasing tax liens. This allows people who are not local to where the property is located to obtain an ownership interest.
On the other hand, tax deed sales are advertised in the local newspaper where the property is located for at least a month before the auction. The title obtained through a tax deed sale is recorded through a specific type of quit claim deed, known as a tax deed, which provides written proof of the change of ownership. In some cases, if no sale was made at the auction, the title may revert back to the county government.
It is important for the purchaser to thoroughly check the status of the title and ensure that it has no encumbrances or defects because this can affect the marketability and value of the property.
If there are other liens or clouds on the title, this can mean that other creditors have a claim on the property that takes priority over the purchaser’s claim. This can result in the purchaser being unable to obtain clear ownership and possession of the property.
In addition, defects in the title can also affect the property’s value, making it harder to sell or obtain financing.
Finally, any litigation resulting from issues with the title can be costly and time-consuming, impacting the property’s value.
What Should I Do if I Have a Dispute Over a Tax Lien?
Tax liens can often lead to complex legal disputes involving multiple parties. These disputes can arise from various issues, such as disputes over bid competition or fraud in online tax lien transactions. Additionally, foreclosure and redemption rights can also be contentious issues.
Redemption rights allow the property owner or interested party to reacquire the property sold at a tax deed sale. However, specific regulations must be followed, and the right of redemption typically only lasts for a certain period, such as one year after the sale. To redeem the property, the interested party must repay the amount paid for the property at the tax sale, any taxes paid on the property after the sale, and a premium, usually between ten and twenty percent.
If the redemption period has passed, the purchaser can prevent the right of redemption by serving a notice of foreclosure. The process and requirements for terminating the right of redemption can vary depending on the jurisdiction.
To avoid disputes over tax liens, seek guidance from a financial advisor and work with reputable companies or agencies. Suspicious lien documents should be avoided at all costs. Legal proceedings or civil lawsuits may sometimes be necessary to resolve tax lien disputes fully. Damage awards or other remedies for losses may be sought through litigation.
Are There Any Defenses to Tax Liens?
Yes, there are some defenses to tax liens that a debtor can use to challenge the validity of the lien.
One defense is that the IRS did not properly follow the procedures for assessing or collecting the tax debt, such as failing to notify the taxpayer of the debt or not providing an opportunity to dispute the debt.
Another defense is that the tax debt is invalid, such as if the debtor has already paid the debt or if the statute of limitations for collecting the debt has expired.
Additionally, a debtor may be able to negotiate with the IRS to release the lien or work out a payment plan to resolve the debt.
Here are a few more potential defenses to tax liens:
- Innocent spouse defense: If the tax liability results from your spouse’s actions, you may be able to claim innocent spouse relief.
- Statute of limitations: The IRS has limited time to collect tax debt from you. If the statute of limitations has expired, the IRS may be unable to collect the debt.
- Bankruptcy: Filing for bankruptcy can sometimes discharge tax debts, but this will depend on the specific circumstances of your case.
- Collection due process hearing: You can request a hearing before a levy is placed on your property, allowing you to present evidence or argue in your favor.
- Mistake or error: If the IRS made a mistake or error in assessing your tax liability, you may be able to challenge the lien.
Seek the advice of a tax attorney who can assist in analyzing the specific circumstances and determining the best course of action in your case.
Do I Need an Attorney If I Have Issues with a Tax Lien Sale?
If you’re dealing with tax lien sales, it is highly recommended that you seek the assistance of a skilled and knowledgeable real estate attorney. A competent attorney can provide legal advice tailored to your situation and offer representation in property tax or tax lien disputes.
They can also handle any necessary legal paperwork and appear in court on your behalf if needed. Having a real estate attorney by your side can ensure that your legal rights are protected and that you achieve the best possible outcome.
LegalMatch is an online platform that can connect you with a qualified and experienced real estate attorney who can assist you with any tax lien issues. Using LegalMatch, you can submit your case information and be matched with attorneys with experience in dealing with tax lien sales and other real estate issues. You can then review the attorney’s profiles, credentials, and reviews from previous clients and decide which attorney you would like to work with.
LegalMatch offers a satisfaction guarantee, meaning that if you are not satisfied with the attorney you are matched with, you can request a new attorney free of charge.
Use LegalMatch to find the right real estate attorney for your case today.