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IRS Tax liens - Developments That Occur In the Tax Lien Market

26th November 2009
By Paul Smith in Taxes
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What is the essence of tax? This is one of those sources of revenue that the administration will make use of to take care of public spending. On the other hand, if the financial system becomes so complicated that even innovative products are accepted without any proper research about these products, it is possible that this may lead to some financial chaos. The issue of tax lien is a feature in the financial system which has existed time immemorial and which has been significant in settling equilibrium of wealth in our financial system. Remember that the end to this has not been projected and the fact that people must default in paying taxes means that tax lien will always prevail even at the detriment of the economy.

Ad valorem tax is tax on personal property that has received a lot of criticism over the years. But the fact is that this form of taxation is not something new. The practice had been carried out throughout ages.

For the administration to properly take care of public spending there is a need and especially for our unstable financial system to make sure that every bit of tax due to the administration must be paid. When this is difficult to be done, the administration now has to turn to tax liens sales as an alternative.

The Credit Catastrophe

The fact that the so many states within the United States have their various forms of legislations means that there are so many different procedures in administering taxes. What should be understood is that the main aim of both the central and states administration is that every form of tax should be collected. But if we take into account the various and often varying courses of actions by the central and state government to collect these taxes, we will find that this defeats the original purpose, which is that of getting all taxes due the administration.

State administrations often have a practice of imposing tax lien on property. This means a right of way has been created on that property which is subject to no claims by a creditor, even a mortgagee. This equally means that it deters lenders to lend to those who will want to get property through a loan. The overall effect on the economy will be catastrophic. This may be what is presently going on in our economy. The problem is that tax liens are being given out to new owners who cannot even trace the previous owners. It is legally provided that the creditor must have knowledge of any tax lien imposed on the property. When a foreclosure proceeding becomes imminent, they will loose all their stakes. This stress will have an effect also on lenders and that is how the whole economy can be put into stress.

The Distressed Society

This will publicly affect the society on a solemn note especially when land that ought to be developed does not receive the proper development or maintenance that it needs. Remember that so many investors will also move out of the investment market and a lot more others will be unwilling to stake more of their money into the economy. In some cases, the local authorities will pay for these lands on behalf of the community. And in other situations, the proceeds of this will be owned by a few individuals instead of the community at large.

Dealing with this issue has led to the revitalization of the theory of ‘land banks' whereby the local administration bears the burden of property loans and makes use of property with utmost worth as an object of negotiation.

The IRS has also modified it mode of tax collection putting tax liens on land at the forefront. It should be noted that the normal course of action was confiscation, foreclosure and imposition on property. This led to public criticisms and Congress recommended that the mode of collection should be modified. Keep in mind that this modification has progressively increased the amount of tax collected by the administration.

Find out more about general law relating to tax liens as well as governments perspective in regards to tax liens when you visit, the top resources on IRS tax liens
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