If you’ve ever bought a car, a house or another asset using a loan, chances are, you’re already familiar with liens. Although you were probably pleased to have one when you closed your loan, other types of liens spell trouble. And when you’re ready to sell your property, it can be problematic if a lien discharge isn’t handled properly.
What Is a Lien, and How Does It Work?
A lien is as a legal claim or a right against a property. When you buy a home using a mortgage, for example, your mortgage lender will place a lien on your property. Provided you satisfy the terms of your mortgage agreement, the lender won’t collect the remaining loan balance until you sell your property, but failing to meet your loan obligations could result in foreclosure. Auto loans work in a similar way.
Although mortgages and auto loans are helpful to most consumers, other kinds of liens can cause trouble. For example, failing to pay your property taxes might result in your local tax authority placing a lien on your house. Even if you pay your mortgage on time, your tax authority could still initiate foreclosure proceedings if you don’t pay the balance due.
Different Types of Tax Liens
You may encounter tax liens at three different levels: federal tax, state tax and sales tax. Here’s how and why these tax liens can be imposed on you or your business:
- Federal/IRS Tax Lien: When you fail to pay a tax debt to the IRS, the government makes a legal claim against your property, which may include personal property, real estate and other assets. This lien protects the government’s interests and alerts creditors. If you need IRS tax lien help, including discharges or subordinations, turn to BC Tax.
- State Tax Lien: If you owe state taxes, the state government may issue a lien — a legal claim on your property and assets. Like a federal tax lien, this information is sent to lenders and impacts your credit report. For state tax lien help and removal, start by calling BC Tax.
- Sales Tax Lien: If your business is required to collect sales tax, you must report and pay that sales tax to the IRS or state government. Failure to pay could result in a sales tax lien on your business in Colorado or elsewhere. For sales tax lien help, contact BC Tax.