Tax Lien

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Definition of 'Tax Lien'

A tax lien is a legal claim against a property for unpaid taxes. It is a type of security interest that gives the government the right to sell the property to satisfy the debt. Tax liens are created when a taxpayer fails to pay taxes on time. The government can file a tax lien against any property owned by the taxpayer, including real estate, personal property, and bank accounts.

Once a tax lien is filed, the government has priority over all other creditors. This means that the government will be paid first if the property is sold. Tax liens can also be used to garnish wages and seize bank accounts.

There are several ways to remove a tax lien. One way is to pay the taxes in full. Another way is to file an offer in compromise. An offer in compromise is an agreement between the taxpayer and the government to settle the debt for less than the full amount.

If a taxpayer does not take action to remove a tax lien, the government may eventually foreclose on the property. Foreclosure is the process of taking ownership of a property and selling it to satisfy a debt. If the property is sold for more than the amount of the debt, the taxpayer will receive the difference. However, if the property is sold for less than the amount of the debt, the taxpayer will still owe the difference.

Tax liens can have a significant impact on a taxpayer's financial well-being. They can make it difficult to borrow money, buy a home, or rent an apartment. Tax liens can also lead to wage garnishment and bank account seizures. If you have a tax lien, it is important to take action to remove it as soon as possible.

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