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Federal tax liens are encumbrances of a property in favor of the federal government. These liens are often incurred due to amounts owed the Internal Revenue Service, if an individual fails to pay tax after a demand by the Internal Revenue Service for payment. Federal tax liens can also be attached to property because of unpaid gift taxes or estate taxes. The lien continues to exist until the amount due the federal government has been paid in full, or lapses due to expiration of the statute of limitations. For taxes that were assessed on November 6, 1990 or later, the statute of limitations is ten years. For taxes assessed prior to November 6, 1990, a prior version of the statute limits the collection period of the lien to six years. But there are exemptions to these limits that may extend the time in which the Internal Revenue Service may attempt to collect on the lien. Tax liens are said to "run with the land" and federal tax liens are not an exception. The lien stays with the real estate parcel, even if ownership changes. The new property owner becomes liable for the tax lien in order to retain ownership of the land. A title search completed prior to the purchase of any property will alert you to any existing tax liens, as well as the amount due and the name of the lien holder. This information will allow you to make an informed decision about the worth of the property. If the property you are purchasing is severely undervalued, it may still be worth the purchase of the property including payment of the tax lien. If a federal tax lien is not satisfied in a timely manner, the agency to whom the taxes are owed may seek to foreclose on the property. If the property is sold in a foreclosure sale, the amount generated by the sale of the property is first applied to the total amount due to the lien holder, including any penalties, interest, and late fees that may have been incurred during the period of nonpayment. Liens on a title can be a drawback and deter the purchase of real estate. But don't let the presence of a lien scare you from a great bargain!
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