Tips in Preventing a Tax Lien

As we all know tax lien is filed against a property owner who has unpaid tax obligations to the counties.  We all know how this tax lien can affect our credit and future transactions.  And once this is filed against us, it will be difficult to release it since it will stay in our credit rating for several years.  One of the main things that we do to prevent this from happening is to pay our debt in full.  However, this will be difficult to some who are struggling in their finances.  Once we received a notice from the IRS, we should respond to it immediately to prevent the impression that we are delaying the collection process, to hide, or transfer our assets because this could lead them to issue the tax lien against us immediately.

For people who are in chaos with their finances, we can still arrange a payment plan with the IRS.  We can pay a down payment to what we owe, and probably arrange a monthly payment until we can pay the taxes in full.  For some people this is the easiest way to prevent a tax lien being filed against their name.  However, for those who really got no time to deal with the IRS, they jumped in into the solution of borrowing the money, and applying for a loan in a financial institution to pay their back taxes in full.  Just to make sure there won’t be any tax liens that will be filed against their name.

Difference between an IRS Tax Lien and a Tax Levy

There are people who are confused of these terms and take it as the same.  But honestly they’re not.  These 2 terms are engaged in your property but it has a different impact on it.  There are really people who don’t have time to understand these things.  These are the 2 common words that we should not take for granted because once it is filed against us, we might fail to redeem it back.

These are the 2 ways of the counties in collecting back taxes from the property owners.  Some people believed that tax lien is safer since it won’t result in taking the property from you.  This is their way of securing its interest in the property.  It mainly hampers financing in your assets.  If a tax lien is filed against you, this will be seen by the creditors and would lead them to think multiple times in dealing with you.

Tax levy is one of the scariest things that could happen to a property owner.  When it is filed against you, this will result in taking the property forcefully away from you.  This is really an actual taking of your assets to fulfill your IRS debt.  This levy can also command a bank to freeze your funds, your savings account, your retirement account, and worst even in your salary.  This can result in losing everything permanently.  Tax levy is the scariest thing to deal with.

How a Federal Tax Lien will Affect Your Credit

As we all know that federal tax lien is the government’s legal claim against your property when you failed to pay a tax debt. This is not a simple thing to just ignore. Paying your tax debt is one of the main things you could do to get rid of this. You must find a way how to get rid of having this since this would cause a lot of burden not only to your property but also to you as the property owner. Having this problem will affect mostly your credit score. You are mostly going to suffer in this area since most of the purchases made in the United States are done through credit score, even when it comes to acquiring new properties and refinancing.

If your credit score is affected, you will likely lose some of the opportunities ahead, and you will need to wait for several years until your good credit will return back to normal. Normally it takes around 10 years that this federal tax lien will remain on your credit. Imagine how many opportunities you will lose along the way for a span of 10 years just because of failure to pay off a certain debt. Once the IRS files a notice of federal tax lien to you, it may limit your ability to get credit. Paying your tax debt is one of the most important things you can do to get rid of this burden.

What’s Good with Tax Lien Foreclosures?

Many people wanted to enter the world of tax lien investing since it is known to give more financial security than any jobs available.  Each of these investors has their own goal upon investing.  Whenever an investor wins the bid he gets a tax lien certificate as a proof that he paid something.  And upon investing an investor can either earn from the annual interest of what he invested, or probably become the owner of the property in case he wasn’t paid up.  Foreclosures are the most wished outcome of every investor because they profit a lot through this.  However, this is the most painful outcome for every property owner because they can watch how their property is being washed away to someone else’s hand in just a span of time.

Most people think that aside from the fact that they weren’t able to pay on the time given to them, it is also believed that it’s caused mostly of the lack of knowledge of the property owners to the rules and the process that’s why it leads to foreclosures. On the other hand, it is also said that due to this that other investors take advantage of the process.   Through foreclosures investors can get and end up owning the property with just a small amount and gain multiple times of profit.  This is a fortune to every investor while a big loss to the property owners.

What’s Good with Tax Deed Investing?

A lot of people wanted to invest in tax deed because of the good return of investments which can let the investor gain multiple times of profit. There’s no doubt why it is known as a safer way to invest in. Every county and state has its own way of collecting delinquent taxes from every homeowner. Tax deed system is known to be one of it. In this system, the county sells to the investors the full rights of the property. This type of system is very advantageous to every investor since they can acquire the full rights of the property with just a fraction of the property’s market value.

The property is usually sold for its delinquent taxes, interest, fees, penalties, and court costs. In this kind of investment, it assures you of every gain no matter what the situation is. You can earn in either way. You might earn through the annual interests or you’ll going to end up earning multiple times of the profit. You end up owning the real estate if the property owner failed to pay you at the given redemption period.

Lack of knowledge by the property owner regarding laws and redemption periods can be very advantageous to any investor because they might fail to retrieve their property. That is the time given to them to gain back their property, and for this to happen the property owner needs to pay all your money back plus the interest.

Common Mistakes to be Aware of in Tax Deeds

Most investors are feeling overwhelmed of all the good things that tax deeds can offer. They even ignore some of the facts that they should be aware of to ensure a safe investment. Many people just think of the profits that they are going to gain from it without considering some of the factors that could affect their investment. If we fail to consider some of the factors, we might end up with big problems on our shoulders instead of enjoying the good pleasure of what it might bring.

One of the common mistakes that investors failed to check is the state or the counties’ laws and regulations regarding tax deed and foreclosures. We must remember that every county has its own rules and regulation as well as the process to be followed. We cannot assume that they are all the same.

Not doing proper due diligence is also one of the common mistakes that investors make in this type of investment. Doing proper due diligence is very important in buying from tax deed states. We should also not forget to check on the property to weigh in its market value which you’re going to invest in. This is not all about the money. If we failed to check on this we might end up having repairs as a burden to our expected profit. And lastly, we must also make sure to deduct all of the extra costs like fees on what we expect to spend, to make sure we won’t lose much on unexpected fees in the process.

How to Start Investing for Tax Deed

Same with tax liens, tax deed investing also requires due diligence. This does not only require money but would require knowledge and time to make sure that we are moving on the right path. As always said by doing research we can minimize the risk we are going to take by entering the world of tax deed.

To start investing:

1. You need to get a list of all the properties available in the county. You can either call the county, ask them if it would be possible to email you list of all the properties available. If not you can also ask them to mail it to you. You just need to pay a penny for the stamp in mailing it to you. Or you might probably visit the county in person to get the list as well as gather the details.
2. Do research about the properties. Scan the properties with the amount you are willing to spend. This will save time in searching through all the properties you might be interested in.
3. If possible visit each property so you can personally see its value. And to make sure that you are getting the right property. As we know not all properties available are in good condition. Some might need some repairs and fixing. Through this you can estimate how far you are going to bid on it.
4. Once you’re done with all the above process, lastly, attend the auction and bid on the items you are interested on.

Researching to Minimize the Risks in Tax Deed Investing

Tax deed is a good investment if you’re really expecting high return of investments in no time. This sale is open to the general public. Tax deeds are usually sold out in small percentage of its market value so the investors can end up owning it by just a fraction of a price. Usually the property goes to the highest bidder of it. One of the best advices that people suggests is to go for the property you would like to own.

You must do a research about the properties so you can see for yourself how much would be the value of the land. Also, the value of the house so you can estimate until how far you’re willing to go for that property. This is important because some of the houses are not in full good condition, wherein it might need some repairs, and will need some fixing before selling it someday if you end up owning it. It would also help to call the county to know some of the details and information about the property. Same as tax liens, the rules and regulation differ on each county as well. That’s why it’s better to make a research so we wound not end up with the wrong one. By doing research you minimize the risks that you’re going to take in acquiring a property. If we master the basics of everything, this investment can lead us to a stronger financial security.

Tax Liens As a Big Investment

Many people who wished for good earnings gets more curious how huge investment returns will they expect and have in tax liens investing. Some might find it complicated to understand the whole process I guess. In every city & state tax collection is a priority, that’s why they need to collect the property taxes to get going. This is the reason why the county sells it to investors. Investor’s earnings depend on the interest rate they got. Interest rate may differ on each county. That’s why it’s really important to make a research first for you to know what you’ll be expecting in every penny you invest.

Many people prefer to buy over the counter tax liens for in this process there’s no bidding, there’s no competition, and the liens mostly have the maximum interest rate which only means a huge investment for anyone. Aside from the high interest rate people can save a lot from travel expenses, food expenses while in travel since over the counter tax liens can also be done through mail or via online. Many people tend to invest to counties that offer high interest rate to make sure they will get a high return of investment. Like for example in Indiana tax liens pay 10% for the first 6 months and gets higher to 15% for second 6 months so for annual basis you’ll get amazing investment returns. Other counties offer usually in a range of 16-24% per year. No wonder tax lien is considered as good and big investment to anyone aside from the fact that investors gets low risk. It also gives a high return of investment.

Tax Lien Investing – An Investment Strategy Within Your Reach

Many people would love to enter the world of tax lien investing. But some people are kind of hesitant in doing so especially to those people living in the counties where they barely do an auction. Tax lien was never been out of reach. No matter where you are you can still participate in their sales. Like through mail or sales online. You can always call the county and request a list which will only cost you a penny for the stamp to mail the list to you.

Our life has been made easier because of technology nowadays. Many counties held their sales mostly online. In this case investors can participate wherever they are; this eliminates the need to show up which is very convenient for anyone who doesn’t have enough time to travel. I know many people are very curious of the process. I’m sure if you know how to purchase an item on eBay I know for sure you know how to maneuver an online auction. Online auction is very easy. You will only be required to register on their auction site, fill out the form, and send a percent of the maximum amount of money you are willing to invest. This will serve as a deposit if ever you will successfully win the bid.

Some may be required to submit an IRS form as well as your Social Security Number. Requirements for online registration always depend on the county. That’s why it is always very important to read their instructions as well as their rules in purchasing online.