Budgeting To Prevent Tax Liens
Posted on August 2, 2010
Filed Under Taxes | Leave a Comment
Everyone is facing a tighter budget these days and tighter budgeting can mean skipping certain payments. Foreclosures due to back mortgage payments are on the rise. Homeowners, however, need to be aware that missing tax payments can be cause for tax liens to be placed on their properties. Even with tight budgeting a little amount of planning ahead can make all of the difference in avoiding tax liens.
Tax liens are placed on homes when the owners have not paid their taxes; property, income, or otherwise. The government places tax liens on their homes to ensure that the debts are paid and that the title cannot be transferred to another individual or put up as collateral for different financing options, including mortgages.
Usually owners that have tax liens placed upon their homes don’t have mortgages on those properties. If there were a mortgage the government would inform the mortgage company who would then pay the taxes and require back payments from the owner using an escrow account. They do this because tax liens take priority over mortgage liens, so if there is a tax lien on a property that they are owed money on they are at a huge risk for losing that money if the property were to be auctioned off.
Often tax liens are placed on owners second properties. The property tax payments can be unexpected expense if they aren’t paying attention. One way to avoid tax liens in this situation is to divide the previous year’s taxes by 12 (for the number of months in the year) and set that money aside each month so that the money is already set aside for when the taxes come due.
Sometimes tax liens are placed on homes because people owe income taxes. This situation can also be easily avoided by the owner contacting his or her employer and answering a few questions to figure out the right amount of federal taxes to be immediately taken from each paycheck. If the owner has a lot of investments that would be taxed it would be a good idea to talk to an accountant to ensure that enough is being taken out and also to ensure that too much isn’t taken out of each paycheck.
An unstable market is no reason for any owner to lose their home. Understanding tax liens and how to avoid them is the first step in the right direction.
Learn more about Tax Liens investing. Stop by No Risk Investor where you can find out all about Tax Liens and how you can profit by them.
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