Definition

A tax lien is a legal claim placed on a property by a government authority to secure the payment of unpaid taxes owed by the property owner.

What is a tax lien?

When individuals or businesses fail to pay taxes owed to the government, whether it’s federal, state, or local taxes, the taxing authority may impose a tax lien on their property as a means of enforcing payment.

Types of tax Liens:

• Federal tax liens: These are imposed by the Internal Revenue Service (IRS) for unpaid federal taxes. Federal tax liens can apply to all property and assets owned by the taxpayer.
• State tax liens: State tax liens are imposed by state taxing authorities for unpaid state taxes. These liens typically apply to property located within the state’s jurisdiction.
• Local tax liens: Local tax liens are imposed by county or local governments for unpaid property taxes or other local taxes. These liens apply to property located within the specific locality’s boundaries.

Tax liens are typically placed on a property after the taxpayer has been notified of the tax debt and given an opportunity to pay. Once a tax lien is imposed, it is usually recorded in a public record. This recording serves as notice to potential creditors and interested parties that the government has a legal claim against the property.

Property owners facing tax liens have several options for resolving the debt, including paying the taxes in full, negotiating a payment plan with the taxing authority, or seeking relief through bankruptcy proceedings or other legal means. In some cases, property owners may also be able to request the release or withdrawal of the tax lien after the tax debt is satisfied.

Example of a tax lien

John owns a property in a small town in Ohio. Due to financial difficulties, he falls behind on paying his property taxes for two consecutive years. As a result, the county government imposes a tax lien on his property. The tax lien is recorded in the county’s public records, indicating that the government has a legal claim against John’s property until the overdue taxes are paid. If John fails to address the tax lien, the county may eventually initiate foreclosure proceedings to seize and sell his property to satisfy the tax debt.