Tax Liens: What is a Tax Lien Certificate?

understanding federal tax liens

A tax lien certificate is a legal document that is issued against a taxpayer’s property that has a lien placed on it due to unpaid taxes. Tax lien certificates are sold to investors through an auction process, allowing the tax authorities to recover the tax amount along with penalties and interest. Taxpayers that are the subject of tax lien should immediately seek tax lien assistance from seasoned tax attorneys. Read on as we discuss various aspects of a tax lien certificate.

Definition of a Tax Lien Certificate

According to National Tax Lien Association (NTLA), a tax lien certificate is an instrument for sale offered by local county and municipal authorities to recover unpaid property taxes. When you fail to settle your property tax debts, the local tax agency can place a tax lien on your property as a result of collection action. Local county and municipal governments will issue a tax lien certificate against a property mentioning the amount owed in taxes, interest, and penalties. This certificate is then auctioned to investors, which allows the local authorities to recover the unpaid taxes, interest, and penalties. It is important to note here that the tax lien certificates do not transfer the ownership of the property but only the entitlement to the amount owed in taxes, penalties, and interest.

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How Does It Work?

If your property has a tax lien certificate issued to its name, it is sold in an auction and goes to a bidder that offers either the lowest interest rate or the highest cash amount. When an investor purchases the tax lien certificate, it is their responsibility to pay the outstanding amount mentioned in the lien. When the taxpayer settles their tax dues with the authorities, the government pays the principal amount along with interest on the money from the investor that bought the lien certificate.

Must Read : Tax Debt Settlement : Everything You Must Know on IRS Tax Settlement Firms

Risks of a Tax Lien Certificate

Investors may consider a tax lien certificate a good investment opportunity but for homeowners tax lien certificates can be problematic. Having a tax lien certificate against your property means that you are not only responsible for paying the tax outstanding but also the penalties and interest accrued. Additionally, failing to redeem a tax lien certificate can lead to foreclosure resulting in loss of property. Even if the property is valued lower than the outstanding amount and you decide not to settle the debt, it can impact your credit score real bad.

The Final Word

If you have a tax lien certificate issued against your property, it is recommended to consult an experienced tax attorney. Connect with the Law Offices of Nick Nemeth that have a team of experienced tax attorneys offering tax lien help in Fort Worth Texas and nearby areas. Our team of attorneys has extensive experience in handling tax lien issues and helping our clients get favorable outcomes. To talk to one of our attorneys at (972) 627-4580 or fill out our contact form.

Tax Liens: What is a Tax Lien Certificate?
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