Tax Lien

AAA

DEFINITION of 'Tax Lien'

A legal claim by a government entity against a noncompliant taxpayer's assets. Tax liens are a last resort to force an individual or business to pay back taxes. To get rid of a lien, the taxpayer must pay what he or she owes, get the debt dismissed in bankruptcy court or reach an offer in compromise with the tax authorities. Federal and state governments may place tax liens for unpaid federal or state income taxes, while local governments may place tax liens for unpaid local income or property taxes.

INVESTOPEDIA EXPLAINS 'Tax Lien'

If the taxes remain unpaid, the tax authority can then use a tax levy to legally seize the taxpayer's assets (such as bank accounts, investment accounts, automobiles and real property) in order to collect the money it is owed. Tax liens are publicly recorded and may be reported to credit agencies. These two features of tax liens effectively prevent the sale or refinancing of assets to which liens have been attached, and prevent the delinquent taxpayer from borrowing money.

RELATED TERMS
  1. Self-Directed IRA - SDIRA

    A retirement account in which the individual investor is in charge ...
  2. Silent Automatic Lien

    A lien that does not appear in any public record. This is a method ...
  3. Back Taxes

    Taxes that have been unpaid in the year that they were due. Taxpayers ...
  4. Tax Service Fee

    A legitimate closing cost used to ensure that mortgagors pay ...
  5. Encumbrance

    A claim against a property by another party. Encumbrance usually ...
  6. Lien

    The legal right of a creditor to sell the collateral property ...
Related Articles
  1. Retirement

    Tax Tips For The Individual Investor

  2. Taxes

    Don't Put Off Your Year-End Tax Plan

  3. Home & Auto

    Should You Buy A House At Auction?

  4. Taxes

    IRS Asset Seizures: Could It Happen ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center