An overwhelming $21 billion in real estate property taxes become delinquent every year. The taxpayers who fall behind on their obligations could face significant consequences, including tax liens in Georgia. However, that’s not the only way a resident can be subject to a tax lien. You could also face this collection action if you fall behind on income, sales, or other types of state taxes.
If you are subject to a tax lien, it’s important to quickly get informed about what the lien means for you, your legal options, your rights, and how to navigate your situation. Depending on your circumstances, your best bet may be to talk directly to a tax lien attorney about your finances and tax debt.
How Tax Liens are Used as a Legal Tool for Tax Collection
Both the IRS and state tax agencies have the legal authority to collect taxes from citizens who owe them. However, it can be very difficult for these agencies to collect debts that taxpayers do not want to pay off and, in some cases, cannot.
A tax lien is one type of enforcement action available to the IRS and Georgia Department of Revenue. A lien is a legal claim that the IRS or GADOR can attach to your personal property, assets, vehicles, businesses, investments, retirement funds, or even bank accounts.
This legal claim is used as a collection effort because it encourages resolution in two main ways. Either the taxpayer will want to settle the debt to remove the lien, or the lien will progress into a property seizure, which will go towards resolving the debt.
Understanding Georgia Tax Liens
State tax execution wouldn’t be possible without the authority to enforce collection efforts, so it makes sense that the DOR can initiate and enforce Georgia tax liens. If you’re on the receiving end, you must understand how a lien could impact you.
For instance, if you own a property or asset with a tax lien, you won’t be able to sell or transfer that asset without resolving the lien. The other party can accept a property with a lien on it, but liens are public knowledge, and it’s unlikely that a buyer will want to assume the liability attached to your lien. If you are able to sell property with a lien attached to it, the proceeds of the sale up to the amount of the lien will go to the lienholder (in this case, the GADOR), not to you.
Even if you pass away, the lien will remain on the property. If the issue isn’t settled, the tax agency will have a legal claim to a portion of your estate.
A lien may not be all you have to worry about, though. Once Georgia’s DOR establishes a legal claim to your property, they have a right to seize it to settle your debt if you continue to neglect your tax situation.
The Definition of a Tax Lien in the Context of Georgia Law
Under Georgia law, a tax lien is defined as a legal claim to secure a debt stemming from unresolved taxes. A tax lien is also referred to as a state tax execution under the law, as it is a form of executing a tax debt and attempting to resolve it.
The lien may prevent or impact the ability of the owner to transfer or sell the property. A tax lien can be issued against individuals or businesses that are found to have a delinquent tax balance.
The Role of Tax Liens in Georgia’s Tax Collection Process
Tax liens play an important role in Georgia’s tax collection process because they establish the legal authority to take even further action in the future. Liens, on their own, aren’t that damaging or debilitating to a taxpayer. Taxpayers can continue to live in their homes, use the assets, or maintain their bank accounts while the lien hangs in the balance.
Once Georgia’s DOR takes further action, though, the taxpayer won’t be in a good position. With the legal claim established, your asset, property, or account is at risk for seizure. At any point, the DOR could decide to seize your funds, take your home, or repossess your vehicle.
Tax liens help incentivize taxpayers to act on fulfilling their tax obligations. Pursuing collections through enforcement actions is costly and time-consuming for Georgia’s DOR, so liens are a good middle-ground option that can produce results. Liens aren’t just a baseless threat and call to action, though. They’re more of a stepping stone that signals the agency’s intent to take further action if the taxpayer doesn’t.
The Creation of Tax Liens in Georgia
So, how does a Georgia tax lien get created in the first place? It all starts when the taxpayer fails to pay the tax debt they owe. The DOR will reach out to the taxpayer in an attempt to collect. If you don’t contact the agency, they have the right to take further action.
Typically, they’ll start by charging you financial fees and increasing interest. If these financial penalties don’t get you to act, the agency will file a lien with the Clerk of Superior Court in your county. This lien will automatically attach to all of your real and personal property. It will be for all your unpaid taxes and any interest and penalties. On top of that, the lien will likely also include a “collection fee.”
Types of Taxes that Can Lead to a Lien
Under the law, property liens in Georgia can arise with regard to any delinquent taxes owed to the state or to any county or municipality within the state. The priority for liens for taxes in the state of Georgia are as follows:
- State-level taxes
- County-level taxes
- Taxes due to schools or other special tax districts
- Municipal-level taxes
These taxes can stem from delinquent property, use, sales, income, and corporate income taxes.
Notice Requirements and Rights of the Property Owner
Georgia’s DOR has the legal authority to immediately issue a lien without any notice to you as a property owner if you have an unpaid tax balance. Despite that, the agency typically follows a very specific protocol that involves sending you several notices.
First, you’ll start receiving letters about your overdue balance. Then, you’ll receive notices informing you about the penalties and interest accumulating on your account. Finally, you’ll be informed about the lien.
Throughout the process, you always have the right to talk to the DOR about your tax situation, request a review of your tax account or financial situation, hire a legal advocate to help you determine your options, negotiate with the DOR, and apply for a payment plan.
Consequences of a Tax Lien
A tax lien will have immediate, indirect consequences. For one, anyone can perform a Georgia lien search and discover that you have a lien on your property. For another, your property is at risk for further collection efforts.
Unless you act to stop collection actions, your property and assets could be at risk of seizure. Below, we’ll go over exactly how a lien could impact you.
Impact of a Tax Lien on the Property Owner’s Credit and Property Rights
In the past, tax liens would impact your credit, but they’re no longer being reported to the credit bureaus by the tax agencies. Your situation won’t appear on your credit report. That said, tax liens are still public information, so it could impact your ability to take out credit or get new loans if your provider discovers your current status.
A lien will indirectly impact the owner’s property rights. Since the government has a stake in the property, it will be harder to sell or transfer. A property owner can still take these actions, but the DOR will maintain their legal right to the property.
How a Tax Lien Affects the Ability to Sell or Refinance the Property
You can legally sell a property that has a tax lien attached to it, but you will likely struggle to find a buyer. Depending on the situation, some of the proceeds of the sale must go to the lienholder, or if the buyer agrees to assume the lien, they generally have to pay the lienholder at the closing.
Refinancing will also be difficult and unlikely since the DOR’s legal claim will greatly reduce your home’s assessed value.
How to Resolve a Tax Lien in Georgia
Considering the many consequences of a tax lien in Georgia, it makes the most sense to invest in resolving the issue. The quickest way to resolve a tax lien is to pay off your tax balance in full. However, you can also dispute a lien by filing a petition in the Georgia Tax Tribunal, requesting a lien withdrawal or a lien subordination.
You also have the right to negotiate with the IRS and the Georgia Department of Revenue to determine if you can reduce your overall tax liability. Sometimes, you may be eligible for penalty relief, but your options depend on your specific financial situation as well as which tax agency you’re dealing with.
Paying Your Tax Bill in Full
Your top option for resolving the lien is to pay off your tax bill in full in one lump sum payment. This is your best choice because it will automatically clear the lien and get you back in good standing. The DOR generally removes the lien five days after receiving full payment.
Agreeing to a Payment Plan
Your next best option is to agree to a payment plan. This arrangement will help you pay off your tax debt over time, while the DOR will agree not to pursue further collection efforts against you while you pay. If you go with this option, it’s important to know that the lien will not be removed until you’ve completely paid off what you owe.
One such payment plan is the Georgia Offer in Compromise, a state-level payment program that functions similarly to the IRS’s federal-level OIC. For eligible taxpayers, an OIC with the Georgia DOR can potentially significantly reduce one’s tax liability and help them resolve their tax lien sooner. Learn more about how OICs work with our free downloadable whitepaper:
Requesting a Lien Subordination
A lien subordination doesn’t make the lien go away. Instead, it’s when the DOR agrees to have its lien take a lower priority than another lien. For example, say you want to get a home equity line of credit on your home to pay off your tax debt. However, the lender won’t let you use your home as collateral since there’s a tax lien on it.
If the GA DOR subordinates its lien, the lender can take top priority and thus becomes more likely to approve your loan. Generally, the DOR will only agree to subordination if doing so helps you pay off your tax debt.
Applying for a Partial Lien Release
The DOR may agree to remove the lien from one or some of your assets. This is called a partial lien release, and again, the state will generally only agree to this if it helps you pay off your taxes. For example, you may request a release if you want to sell property to pay off your tax debt, but the lien is preventing you from selling.
Avoiding Tax Liens in Georgia
How do you prevent a tax lien in the future? The best way to stay in good standing with the IRS and the Georgia DOR is to get informed regarding your tax obligations and stay on top of paying what you owe.
Importance of Timely Tax Payments
If you agree to a payment plan with the DOR, you need to consider the agreement legally binding. If you don’t make timely payments, that could invalidate your agreement and the DOR will once again free to restart collection efforts.
How to Seek Help if You’re Unable to Pay
Are you currently facing a Georgia tax lien and know you can’t pay off what you owe? If you have an ongoing financially distressing situation, it’s a good idea to hire tax representation. A tax professional can help you review all your options based on your financial situation. They can also advocate for you while speaking with DOR agents.
Ready to Get in Touch With a Tax Attorney for Help?
If you’ve fallen behind on your taxes and are subject to a tax lien, it’s important to consider your options carefully. If you ignore the notice from the tax agency and don’t try to get back in good standing, further collection action may occur. You could have your property or assets seized, or the tax agency could issue other collection efforts against you, like garnishing your wages.
Considering the complicated nature of tax liens in Georgia, it’s usually best to discuss your situation with a tax attorney. The right tax lawyer will help you understand your options and devise a strategy for handling your tax issues.
Are you ready to get started? Schedule a call with our team at Wiggam Law to take the first step towards peace of mind.