Tax lien foreclosures are properties that have been repossessed by government agencies due to outstanding tax debt owed by a homeowner. A tax lien is essentially a debt owed on unpaid property taxes, income tax debt or other local, state or federal taxes that go unpaid, but tax liens are most commonly associated with unpaid federal taxes.
When a homeowner fails to pay their federal taxes, the Internal Revenue Service will issue a Notice of Federal Tax Lien, which outlines the amount owed in taxes to the government, plus additional fees and associated costs. If the tax debtor does not pay off their debt owed within the time frame specified by law, the IRS will issue a Notice of Federal Tax Lien. This essentially means that the government has the legal right to impose a lien on a tax debtor’s property, giving them the legal basis for eventually repossess the property and sell at tax lien auction if the tax debt goes unpaid. The proceeds of the auction are then used to cover the debt owed.
Tax lien foreclosures are very common and for buyers, they can present some fantastic opportunities to buy properties below market value. The procedure by which these tax lien foreclosures are sold off can vary from the federal, state and county levels. As the taxing agency of the federal government, the Internal Revenue Service has complete power to record a tax lien against real and personal property owned by delinquent taxpayers as security based on income taxes owed.
A Notice of Federal Tax Lien will be filed against the taxpayer’s property only after the IRS assesses the liability, sends out a Notice and Demand for Payment, and the taxpayer neglects or refuses to pay the full amount within 10 days of notification.
Depending on the individual county, tax foreclosure auctions can be called anything from “Property Tax Foreclosure Sales” or to “Property Tax Foreclosure Auctions.” In the end, they all mean the same thing.
Different local governments can call them by different names, but the process is basically the same, and so is the result. A home that was foreclosed on for delinquent property taxes is being sold.