What Is a Tax Lien?

Fact Scenario

For 35 years, Wilmer has lived in the same house. In recent years, Wilmer has suffered from an illness that required him to stop working. Wilmer hasn't been able to keep up with his expenses and, for the last three years, he hasn't paid his property taxes. Wilmer has ignored the numerous collection notices that were sent by the local taxing authority. When Wilmer attempted to sell his house, the prospective buyer's title inspection revealed numerous tax liens against Wilmer's house.

A tax lien is a mechanism that is available to a taxing authority to insure the payment of taxes. With regard to real property, a tax lien may arise when a property owner fails to pay the taxes that are due on a property. A tax lien constitutes a cloud upon the property owner's title to the property. While it may be possible for a prospective buyer to purchase a home subject to the tax liens, it will more likely be the case that a portion of the proceeds of the settlement will be set aside for payment to the taxing authority in order to extinguish the liens.

The government relies on property taxes to support many different functions, such as paving and grading streets, sewage management, and other improvements. Thus, a tax lien serves an important function.

A tax lien may arise at the state or federal level.

Remedies

Once a taxing authority obtains a tax lien, it may force a sale of the property. The applicable law, either state or federal, must be examined to determine the extent of the tax lien, as well as its duration. The priority to which the tax lien is entitled with respect to other liens upon the real property is also governed by law. Lastly, the property owner's right of redemption following a tax sale, if any, is governed by the applicable law.

How Do I Obtain the Release of a Tax Lien?

In order to obtain the release of a tax lien, contact the taxing authority which holds the lien. Generally speaking, you will be required to pay the amount of the lien in full in order to obtain a release. For more information on how to obtain the release of federal tax liens, contact the Internal Revenue Service, and for more information on how to obtain the release of state tax liens, contact your local taxing authority.