Tax Lien - Explained
What is a Tax Lien?
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What is a Tax Lien?
A Tax lien is a legal claim that the government has over a non-compliant taxpayers properties or assets. A tax lien arises when an individual or business fails to pay taxes owed to the taxing authority (Federal, State, or Local government). Tax liens generally gives the federal government the right to claim a legal interest in the assets or personal properties of a taxpayer.
Back To: COMMERCIAL LAW: CONTRACTS, PAYMENTS, SECURITY INTERESTS, & BANKRUPTCY
How Does a Tax Lien Work?
The federal, state, or local government can place tax liens on an individuals assets or property after non-compliance to tax payment.
Although, tax lien is a legal claim, it does not necessarily permit the sales of asset by the government. It only stipulates that the government has the first claim over the assets among other creditors who might be eyeing the assets.
If the debt remains unpaid, the government may initiate a foreclosure or repossession action against the property.
Tax liens also prevent the owners of the properties (non-compliant taxpayers) from selling the properties or assets.
The lien holds until the taxpayer pays off the debts or when statute of limitation takes effect.
Tax liens may be publicly recorded, they reflect on the offenders credit report and can last up to 10 years.
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