IRS Tax Liens Collection Actions

The Internal Revenue Service or IRS has its ways of collecting tax debts from delinquent taxpayers.  If you do know them yet, here are the collection actions:

IRS Bank Levy
This is a popular form of collection action by the IRS in which all funds from your bank account are going to be seized by them.  You would get a warning at first in your mail about the funds to be seized and then it would be frozen.  When it is frozen, you need to contact the IRS as fast as possible if you’re going to save your funds.  All of your funds would be gone if you would not take any action.  Note that this is one of the most painful collection actions of the IRS.

IRS Seizure
Your assets along with other valuables are going to be in danger with this IRS action.  These include homes, vehicles, and any inheritance would be used to repay your tax debt.  The IRS rarely uses this but once your assets are seized, it would be very difficult to get them back.

IRS Wage Garnishment
The IRS can seize funds directly from your paycheck with this type of collection action.  You could be left with only little money to pay your bills.

These three courses of actions are only done by the IRS to recover lost revenues which are needed by the public.  If you avoid IRS tax liens early on, then none of these would happen and your property and assets stay in place.

Foreign Investors Tax Liens Homes Investing Solution

Lots of foreign investors are eager to invest in tax liens homes as a way of getting into the US real estate industry.  These investors are certain that this type of investment can give them high profits especially if it is done the proper way.  This is why they partner with property management companies that give expert advices in order not to waste this golden opportunity.  Such partnership is very important when it comes to the success or failure of a business.

Property management companies help foreign investors in handling the properties for them.  It is not easy due to visa limitations and the distance.  Also, some of the investors may not be familiar with the rules and regulations governing tax sales on liens.  So, if they want less hassle in researching and doing things on their own, then property management companies can help.

Foreclosure Process of Tax Lien Properties

Tax lien foreclosures are undertaken by taxing authorities for state and federal taxes.  They do it with a police warrant forcing the property owner to vacate his home.  Afterwards, the property is sold to a public auction.

The main goal of a tax lien foreclosure is to recover lost revenues and unpaid taxes.  Tax lien properties are generally cheaper than its original market price.  This attracts many real estate buyers who want to invest money at very affordable properties.

The public auction of properties begins at a predefined schedule by the taxing authorities.  The highest bidders are awarded with tax lien certificates and required to pay ten percent of the total amount of the property.  The remaining amount must be paid in thirty days as mandated by the state laws.  If homeowner fails to pay within the redemption period, lien certificate holders may apply for foreclosure of the property and get ownership rights.

Tax Lien Properties Not Redeemed

The tax lien now in most cases, are paid by their respective owners or the mortgage company before the ownership status of the property is in jeopardy.  Majority of properties left in the sale don’t have mortgage by the time the lien reaches maturity at late stages.  But if they did, the bank would have came in and paid the necessary property taxes in order to save their interest.

There are tax lien properties however, which were not redeemed by their owners.  Here are some reasons:

-Some of these homeowners had inherited the property or were deceased, and did not make the taxes.
-In other cases, the homeowners just moved on with their lives and did not bother to keep making the tax payments.
-While other owners just live in the properties in a short period of time and were not emotionally attached to it.

Now because the properties included in the tax sale were free and clear, all that is needed to be accomplished is to make the payments, and flip the property for more profits.

Iowa Tax Lien System

Iowa is one of the best states when it comes to investing in tax liens.  There is a 24% interest per annum in this state but the rate is not bid down at the tax lien sale.  It must be noted however, the down side to this is the property percentage ownership should the lien not be redeemed by the homeowner, is bid down at the sale.  The smallest percentage in the property that wins the lien will be taken by the investor.

Though the annual rate in Iowa is quite high, there may not be a good amount of incentive for the owner to redeem the lien, since he does not lose entirely his property if he does not redeem.  However, the good thing about Iowa is there is not always a bid down in the percent ownership.  This depends on the counties’ procedures.  It is because some would award bids that are based on a lottery system rather than the bid down system of ownership.

Save Your Property from Tax Lien Sales

Each of the 50 states in the US has various laws on tax liens and even differs on the county level.  Tax lien sales can take place when the local government imposes an auction ordered by the court, for property taxes of delinquent homeowners.  If you are one of them, and wishes to question the charges against your lien, then continue to make the payments in case you’re going to lose the decision.  Know all the facts about the lien when you receive the notice in the mail.  This is going to help you create a payment plan to save your property and avoid further actions taken by the government.

The government may issue a lien on your property depending how late you are on your taxes.  The tax lien certificate would be sold to an auction to claim the total taxes owed, plus any interest and penalties on the amount owed.  So, it is a must to pay your property taxes on time and never neglect your duties as a taxpayer.

Read This Before Purchasing Tax Lien Certificate

When you purchase a tax lien certificate, there would be the chance of the lien not to be redeemed by the homeowner, and you would foreclose it.  What if it’s a worthless property?  Then, you are stuck with it and no one would probably buy it from you.  The problem is you would continue to pay for its back taxes and if you stop, it would return to the county that sold the lien.

The fact is there are risks involved in tax lien certificate investing, and there is no guarantee yet that you would get lots of money overnight.  However, it is a great way of investing your hard earned money if you know exactly what you’re doing.  Remember that there are risks to avoid and you can fail miserably if no due diligence is done.  So, for a better chance of success in purchasing profitable tax lien certificates, always research ahead and do your homework.