A tax lien is a claim against property in order to secure the payment of taxes. Local, state, and federal governments may all obtain tax liens as a result of a property owner’s unpaid taxes. Tax debts are different than other types of personal debt, in that they are attached to the real estate, no matter who owns the real estate. Thus, the real estate owner is responsible for any tax liens on the real estate, even if those debts were incurred by a previous owner of the real estate. Plus, in some jurisdictions, the real estate owner may also be personally liable for the delinquent taxes that gave rise to the tax lien.
The types of unpaid taxes that may result in a tax lien include real or personal property taxes, income taxes, gift taxes, estate taxes, and virtually all other types of taxes, as well. Tax liens can be assessed by all different levels of government. For instance, failure to pay local property taxes might result in a lien being assessed by the appropriate local government body. On the other hand, a property owner’s failure to pay federal income or estate taxes might result in a federal tax lien being assessed by the federal government.
Procedures for filing local and state tax liens will vary widely in accordance with state laws. Government officials typically must follow certain notice requirements and waiting periods before tax liens take effect. On the federal level, however, failure to pay taxes as demanded within a ten day period results in an automatic, retroactive federal tax lien by operation of law. Therefore, federal government officials need take no further action to place a federal tax lien against a property owner’s real estate, and against all personal and real property that the person owns in the future. However, as a practical matter, the federal government typically files a “Notice of Federal Tax Lien” in the records of the county or state in which the property is located, so as to perfect its lien, or to make it superior to any other third party’s liens that may have been filed against the real estate.
In order to release a tax lien, a property owner must obtain a legal document signed by the lienholder, which indicates that the lien has been released. This release of lien must also be filed in the real estate records of the jurisdiction in which the real estate is located. Likewise, federal tax liens are released by the execution of a Certificate of Release of Federal Tax Lien. However, the Internal Revenue Service (IRS) is unlikely to issue a Certificate of Release unless the tax debt has been satisfied in full, or if the IRS no longer has a legal interest in collecting the debt.
As tax liens necessarily encumber real estate until they are resolved, you may put your ability to sell or transfer your real estate as needed if it becomes subject to such a lien. Therefore, if you are facing the filing of tax liens on your real estate, you should consult an attorney who is experienced in tax and real estate matters for assistance in dealing with those liens.