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Tax Lien Definition

Updated on May 14, 2024 , 454 views

As per the tax lien meaning, it is referred to as the legal claim against the assets belonging to some business or individual failing to pay the respective Taxes to the government.

Tax Lien

In general terms, a tax lien delivers guarantee of the debt’s payment like some loan –taxes, in the given case. In case the Obligation does not get satisfied, then the creditor can consider proceeding towards seizing the assets.

An Insight into Tax Lien

The state or federal government can go ahead with placing the tax lien on some property in case the owner would be in arrears when it comes to Income taxes. Local governments can consider placing the tax lien on some property for the non-payment of local or property income taxes.

Tax lien does not imply the property is going to be sold. On the other hand, it offers the assurance that the respective tax authority is going to receive the first claim over any other type of creditor who might be vying for the assets of the creditors.

Tax Lien and its Process

The process involving tax lien is known to commence when the taxpayer would be receiving a letter to reveal the details about the amount that is owed. This is referred to as the demand or notice for payment.

In case the taxpayer would Fail to pay off the debt or make an attempt for resolving the same with the respective IRS or Internal Revenue Services, then the agency can go ahead with placing the tax lien on the assets of the individuals.

The lien is known to attach to all of the assets of the taxpayer. These would include the property, vehicles, and even securities. Any asset that the taxpayer would acquire as the lien would be in effect would also apply. It is also known to attach to any specific business property along with the accounts receivable for the given business.

In case the taxpayer would choose filing for Bankruptcy, then the respective tax debt and lien would continue even after the declaration of bankruptcy. Most debts get wiped out by the respective bankruptcy proceedings –excluding federal tax debt.

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Role of the IRS

In the United States, the Internal Revenue Services or IRS is known to place the lien against the assets of the taxpayer –including Bank accounts, home, and vehicle. This is the case when federal tax payments tend to be delinquent while there has been no proven effort for paying the taxes that are owed.

A federal tax lien tends to have precedence over all forms of the claims by the creditors. It also becomes immensely difficult for the respective taxpayers when it comes to obtaining credit or selling the assets. The only method of releasing the federal tax lien is by fully paying the tax that is owed or coming across some settlement with the IRS.

All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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