A tax lien on your home or other real property can cause numerous financial issues, including making it incredibly hard to sell or refinance. When you plan on selling a home in Florida with a tax lien, it’s important you understand how liens work, how they affect the process of selling a home, and what you can do to clear the lien. While having a lien doesn’t make a sale impossible, there are more things to consider and more professionals you need to speak with.
Understanding a Tax Lien on a Home
A tax lien is a claim placed by a tax agency, claiming your home or other property as collateral for unpaid debt.
In 2024, the IRS assessed $84.1 billion in civil penalties. Penalties can be for the failure to file or for inaccurate information. When you are assessed penalties, and you do not pay them, some continue to be assessed, and all have interest. This can mean the debt grows significantly over time. Eventually, the IRS begins collection actions for unpaid taxes. The more significant your debt, the more aggressively the IRS is likely to use these collection actions.
The IRS filed 196,996 federal tax liens in 2024. Tax liens are one type of collection action and can be incredibly stressful when they are placed on your home. The IRS files a Notice of Federal Tax Lien, and this is part of the public record. Creditors, real estate agents, and others can find the information about the lien on your home. Liens can also be placed by the state tax agency. The lien states the government has a claim to the property.
How Does a Tax Lien Affect Selling a Home?
There are several financial consequences of a tax lien on your home, some of which include:
- Preventing you from selling the home before the lien is resolved
- Making agreements with a buyer much harder to secure
- Stopping you from refinancing the home, limiting the improvements that can be made
- Limiting your funding and credit options due to the lien being public information to creditors
- Leading to the IRS or state agency being much more involved in the sale of your home
- Delaying the closure process until the lien is dealt with
If you don’t address the lien, it remains attached to the property. Few home buyers want to get a home with a lien attached to it.
What Can You Do About a Lien on Your Home?
The quickest and most effective way to remove a lien from your home is to pay off the debt you owe the IRS or state agency. The IRS releases liens within 30 days of paying your debt. However, if this isn’t financially possible for you, there may be other ways to address your debt. This includes:
- Lien discharge: A lien discharge removes the lien from the specific property it is on. This can mean you receive little or no profit from the sale, but allows the sale to occur.
- Lien subordination: This keeps the lien in place but gives other creditors the ability to act before the IRS. This may include creditors like the lender for the buyer of the home.
- Negotiating the debt and lien withdrawal: The IRS may withdraw the lien from the property. One reason for a lien withdrawal is if you negotiate a way to pay off the debt, such as an installment agreement or an offer in compromise.
Working with a Jacksonville IRS tacticsattorney is essential to assess the different requirements, advantages, and drawbacks of these options. The right attorney can help you protect your financial well-being, determine the right way to address your debt, and negotiate on your behalf with a tax agency.
FAQs About Selling a Home in Florida With a Tax Lien
Can You Sell a House With a Tax Lien on It in Florida?
It’s possible to sell a house with a lien on it in Florida, but the lien generally needs to be cleared. It is important to hire a tax lien attorney to address your unpaid taxes. The ideal way to get rid of a lien is to pay off your taxes. If you can’t, an attorney can look at debt settlement options. You are more likely to successfully sell a house with the lien cleared.
How Do Tax Lien Sales Work in Florida?
Tax lien sales in Florida are the process a tax agency uses to recover part of the debt it is owed. The property that the tax lien is placed on can be seized and sold at a tax lien sale. When the certificate is sold at auction, that is how the IRS collects a profit. Eventually, the certificate can be submitted for the tax deed, meaning that the person now owns the property the lien was on.
Should You Buy a House With a Tax Lien?
Before buying a house with a tax lien, it is essential that the lien is cleared by the current property owner. If it isn’t, the home could be seized as collateral by the IRS or state tax agency after you have bought it. The lien becomes your responsibility. The lien needs to be cleared through paying off the tax debt or reaching an agreement with the tax agency. You should always talk with an attorney about these purchases.
What Are the Rules for Liens in Florida?
Liens in Florida are placed by creditors to claim property as collateral for an unpaid debt, and most creditors have to get approval from the court to place a lien. This is not the case for certain types of debt, like state or federal tax debt. A lien stays in place on your property if you don’t address the debt, and it can also be extended. If you continue to ignore the debt, the creditor can seize the property.
Hire a Tax Lien Lawyer at TaxSmith, LLC in Florida
With the current economic state, your home is an important asset that has a lot of potential benefits. Unfortunately, when you have a tax lien, that has to be addressed first. At TaxSmith, LLC, we have over a decade of experience helping taxpayers in Florida deal with collection actions made by the IRS or state agencies. Reach out to our firm today for compassionate and diligent legal guidance.
