Do Federal Tax Liens Attach to Property?
I’m Ted Thomas, and I’ve been involved as an investor and entrepreneur in a subset of traditional real estate for more than 30 years.
Today I’m answering your question, “What is a federal tax lien?” I can answer that quickly by telling you for sure that it’s something you don’t want.
The short answer is a federal tax lien is the United States government’s right to keep or take possession of personal property until that person takes care of unpaid federal taxes.
Folks, this is serious. The federal government has the ability and the right to seize your real estate or personal possessions including your property If you have unpaid federal taxes.
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How Does a Federal Tax Lien Work?
The lien is filed, and it attaches to everything you own at the county records. The federal government will send a notice to all creditors and the public that you have a federal tax lien.
I’m repeating, the lien attaches to all assets. That means securities, real property, vehicles, even business properties and accounts receivable.
Many people believe that they can just walk away from debt and declare bankruptcy and that will solve their problem. Guess what? It’s not possible to walk away from federal debt except in certain instances. I’m not an attorney so you must seek legal advice.
I’m sure you’ve figured this out, but I’ll reiterate that this is serious. Your credit is destroyed because the federal tax lien takes priority when it comes to payment. It’s doubtful if anyone will extend your credit if there’s a federal tax lien for payment recorded in the official records.
To summarize, you need legal help if you have a federal tax lien filed against you and you have unpaid taxes. However, if you have paid those taxes, there are processes to discharge you from those liens. I am not an expert. I’m not an attorney, certified public accountant, or broker. You need legal counsel.
Federal Tax Liens on Tax Defaulted Property
If you’re searching for tax liens on properties that are close to your home or otherwise, you’ll notice many have federal tax liens. That does not keep the county from having a tax defaulted auction or placing a tax lien certificate on the property.
Understand that the local county has the ability to levy after they have placed the tax lien. Levy means they will take the property and sell it at a tax defaulted auction, usually with a starting bid very close to the back delinquent taxes.
These rules apply to all 3,000+ counties across the United States.
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Buying Seized Real Estate at a Tax Defaulted Property Auction
Many county treasurers will auction off real estate at prices significantly below the tax assessed value. They do so to motivate and incentivize members of the public to buy.
The county, like the federal, has the ability to levy once they have passed through due process. The county can levy and confiscate and resell the property for past due property tax.
Buying real estate at county auctions demands research, not only of the records, but the property should also be researched. Is it slightly used and abused? Has major damage? Or in good condition?
Bidders should know their exit strategy before making a bid. Most properties are sold at bargain prices with no mortgage or deed of trust loan. Bidding starts at most auctions at the past due delinquent taxes, and that is usually significantly below the tax assessed value.
Ask yourself, if you could buy slightly used and abused real estate for 10 or 20 cents on the dollar, and you could put signs on the front lawn and small ads on eBay, Craigslist, and Facebook Marketplace to sell the property for 50 or 60 cents on the dollar to a fixer-upper guy or gal, how well do you think that would work for you?
We hope you enjoyed Ted’s lesson, “What Is a Federal Tax Lien?”
A federal tax lien is a serious matter that can jeopardize your assets and negatively impact your credit rating. If you have a federal tax lien, the most prudent course of action is to seek legal counsel.
If you’d like to know more about tax delinquent real estate investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
You can learn how to reap the huge rewards from tax lien and tax defaulted property investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.