What Is A Tax Lien?
There are people new to the financial industry and tax arena that are unsure of many of the financial terms and laws that apply to working Americans
. Applying these terms and laws to themselves then becomes even harder.
In the financial industry there are a number of terms that are often misunderstood or misinterpreted, causing many problems for countless people.
A lien, for instance, is a law that is considered a form of security interest applied to an item or property to secure the payment of debt. In other words, it is a form of collateral to insure that the debtor pays off the debt he or she has incurred.
A lien may be applied to almost everything that is able to be purchased or have ownership. They may also be agreed upon or non-consensual.
Liens may be applied to mortgages, car loans, and security interests, just to name a few.
Knowing the definition of a lien then, makes it easier to understand the definition of a tax lien. A tax lien is a lien enforced by law that is usually imposed upon property of the tax payer to secure the payment of taxes from the debtor.
This type of lien may be enforced on the following circumstances: delinquent (unpaid) tax payment on real estate property, personal property, or a failure to pay income or other taxes.
In the case of real estate, one must not forget that the lien "runs with the land." In simpler words, this means that if the owner of the property moves or sells the real estate, the new owners will be responsible for the lien on property.
A federal tax lien may also be applied to any federal taxes, income tax, gift taxes or estate taxes.
In order to have a tax lien released is to pay in full. Sometimes the IRS will decide that they have no further legal interest in the tax being paid and they will then send a Certificate of Release of the Lien to the debtor.
This almost always happens with a federal tax only, and is rare. The best way to avoid this type of lien and to avoid having a lien placed on you at all is pay your taxes in full and on time.
Debtors should also remember that regardless of how long it takes, you should try to pay off the lien as soon as possible to avoid getting into trouble with the IRS. Being a good tax payer will also pave the way for other great benefits in the future.
by: Tom Selwick
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