Delinquent Taxes: Everything You Need to Know Delinquent Taxes: Everything You Need to Know

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Delinquent Taxes: Everything You Need to Know

Americans with delinquent taxes has become a growing problem in our economy.

Missing your mortgage payments is not the only way to lose your home. You can lose your home by not paying property taxes as well.

What can you do if you start to feel like you are going to fall behind on payments?

You have options! Find out more about what you can do to save your home if you are unable to pay. 

How Do Property Taxes Work?

Property taxes are a fixed amount of money paid on a regular basis (annually, biannually, or quarterly). The amount paid is calculated based on the value of the property or home.

If your home is worth a lot of money, you will pay more in property taxes.

Usually, property taxes are paid through an escrow account from the mortgage lender. The borrower pays extra funds for property taxes to the lender, but also pays interest as part of the monthly fee.

If escrow isn’t established, the homeowner will pay the property taxes separate from the mortgage. Sometimes, however, people can’t pay their property taxes and become delinquent on their accounts. 

Tax rates are usually determined by the state or local governments. This is why different cities may have similar homes that are worth different amounts.

Getting in touch with an established tax professional can help you figure out what the rates are in your area.

A lot of people don’t really know what they are getting into before they purchase property and the local tax rules may be different than they expect. This can create a huge burden on someone’s life.

If taxes aren’t paid when they are due, they become delinquent property taxes. 

Delinquent Taxes: What Happens Next

When property taxes are no longer manageable, the problems start to stack up fast. The taxing authority decides taxes are delinquent when a homeowner misses one of their payments.

The first thing that happens is the taxing authority will start to charge interest on what is owed. The interest rates will change based on the state, length of delinquency, and taxing authority rules.  

If the amount is still not paid, there will likely be a tax lien placed on your property. This lien will take priority over any other types of liens you have.

Tax liens make the title of your property up in the air and this keeps a homeowner from being able to sell or refinance. This means that you aren’t able to sell the home or property and the property taxes away. 

Once the lien has been around for a while and it hasn’t been cleared, the taxing authority can then order a tax sale. Your property is able to be sold at auction at this point and it happens in two ways. 

In a tax deed sale, the highest bidder on the property will own the home. This is the most straightforward way and may be similar to a foreclosure listing.

In a tax lien sale, the lien on the home is sold to another person. The homeowner then owes the investor for the back taxes. If not paid, the investor can move to foreclose on the property to take ownership.

Can You Prevent the Sale of Your Property?

Obviously, the sale of your property is the worst case scenario.

In order to prevent the sale from happening, there are a couple of things you can do other than just paying off the amount due before the sale occurs.

Check out two ways that you can protect your home or property from being sold below.

Objection of Assessments

The first option is to object to the assessments. Local law will usually provide a way for the homeowner to challenge the number of tax assessments. You can reduce your tax liability in this way.

You can object to the assessment by asserting the assessment is too high for the property’s taxable value. You can also object based on the idea that the property was not assessed accurately.

If the assessment is reduced, you may have less to pay on your property taxes and that could be more manageable.

Seeking Abatement or Compromise

Every state has its own rules about abatements that may reduce at least part of the tax liability. If someone has a disability, specific age, or certain personal status, they may be eligible.

There are also some states that defer taxes based on the fact that the taxpayer proves financial troubles. Once taxes are delinquent, however, a deferral may no longer be possible.

Once a tax sale occurs, the homeowner can possibly redeem their property. This can only happen if the entire sale price (plus costs and interest) are paid after the sale.

This is seen as a compromise but is uncommon due to the high amount of money that would be owed. 

Options After Taxes Become Delinquent

If your taxes have turned into delinquent taxes, you may need help to deal with your troubles. After all, most people don’t want to be put in that situation and are facing financial hardships as a result.

Many Americans deal with financial problems today, but you don’t have to be one of them. When you have trouble paying your property taxes, don’t suffer alone.

Consider tax advisory services or even a CPA to help you navigate what to do next. Contact us at 704-303-9998 to book an appointment today.

Do you want the best tax strategies?

Taxes are complicated. We make it easy.

Schedule a free 15-minute consultation with our expert to start your journey to increased profitability and well-managed finances!

About ATG Accountants & Advisors

ATG Accountants & Advisors is your partner in professional and personal financial management. We are experts in providing profitability driven accounting, CFO, controller & tax advisory services for small businesses seeking growth or expansion.

Stop struggling to keep up with your finances. Gain access to an experienced accountant.
Do you want the best tax strategies?

Taxes are complicated. We make it easy.

Schedule a free 15-minute consultation with our expert to start your journey to increased profitability and well-managed finances!

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