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What are Government Tax Liens?

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  • Written By: Ken Black
  • Edited By: Andrew Jones
  • Last Modified Date: 13 October 2017
  • Copyright Protected:
    2003-2017
    Conjecture Corporation
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Government tax liens are a way for the government to put a claim on someone's property if an obligation is not properly discharged. In order to do this, the government agency in question may need to go to a court and request this. Often, this may be done automatically once the agency informs the property owner of the situation. If the owner wishes to appeal, then a court may need to consider whether a government tax lien is warranted.

A number of different agencies in the government are capable of imposing government tax liens. Local governments, especially those trying to collect property taxes, may impose such leans. A federal tax lien may also be imposed by a national government if obligations are not paid in a satisfactory manner. For example, some government tax liens in the United States are imposed by the Internal Revenue Service. These IRS tax liens may seek money from an individual or a company, and are typically imposed because of an alleged failure to pay income taxes.

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If government tax liens are threatened, the person or company subject to the action may have several different options. The first option is to pay the outstanding taxes either in full, or come up with a payment plan that is acceptable to the agency in question. Once the government imposes the lien, the lien remains active until the obligation is satisfied, or until the property is sold and the obligation is paid. The other option is to fight the action in court and explain why the lien is invalid.

Some government tax liens may be sold at auction, meaning the property owner may not even deal with the government after such a point. While the property owner may still have control of the property, he or she will likely need to make a payment, with interest, to the holder of the lien. If the payment is not made within a certain period of time, then the property will eventually change ownership.

Some government tax liens may also be subject to forced government foreclosures. In those cases, if the lien is not paid, it goes through a foreclosure process very similar to that used when a mortgage is not paid. The local county sheriff or other designated agency publishes the notice of a sale, and investors or others interested in the property may come to bid on it.

Many government tax liens that head to auction may be subject to something known in real estate law as a right of redemption. In this case, the owner of the property may reclaim the property within a certain number of months or years, provided he or she has met the obligation, and any additional interest payments. If the owner does not satisfy the obligation, then the winning bidder owns the property clear of any redemption rights.

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