When the word ‘property’ comes up, the word ‘taxes’ spring to the mind. Well, it’s natural because both are like two sides of the same coin. Property tax is that amount of money which the owner of any real estate property is expected to pay to the local government body. There is one type of charge which is sometimes confused with the property tax. This tax is known as special assessment tax.
These are two distinct forms of taxation. The first one is that which tends to rely on the fair market value of the property being taxed for justification. The other relies upon a particular enhancement known as a benefit for its argument. In any system of taxation, there are three stages which are attendant on the imposition of any tax. These are levy or declaration of liability, assessment, and collection.
The foremost is the legislative function; the second one is the quasi-judicial and the last one is an executive function. At times of resolving of levying the property tax by the local authority, the council passes a resolution to collect the tax. This resolution should specify the rate at which and date from which the fee shall be received.
An essential benefit of a tax on property over a tax on income is that the revenue always equals the tax levy. This is entirely unlike income or sales taxes, which can result in shortfalls producing deficits. Unfortunately, the sad aspect of property tax is that it tends to bring negative impact on individuals with fixed incomes such as the elderly, or those who have lost their jobs. The assessment is usually made up of two components — the improvement or building value and the land or site value. The public official who determines the amount of real property is called the tax assessor.
There are also various guidelines for determining the annual value of the property. These are:
Primary value- This primary value is being fixed in all municipalities for different zones for taxation of the yearly rental value of the buildings and lands. This fundamental value may be based on per sq ft per month of residential properties.
Depreciation- Some discount may be given to the individuals. However, this discount or rebate or reduction is fixed.
Occupation- A discount of 30% is given where the owners themselves occupy buildings.
Nature of building- The classification of structures can be categorized as thatched, tiled and R.C.C.
Ceiling- There is several ceiling fixed for enhancing the taxes consequent on the quinquennial revision of property tax.
So these are some of the guidelines which are employed by the government for determining the property tax of various properties.
If a person owning property is unable to pay property tax, the government may place a lien on the property and put that on auction. Real estate foreclosure investing is profitable as the purchase of lien certificates may be worth your investment.
But note that every state has a different set of rules and laws about the lien tax properties and tax lien foreclosures. Remember always that the government has every right to take the property tax from the person owning property anywhere.
The law provides that the federal tax lien can arise out of nonpayment of any tax, but the most common cases where a federal claim generally appears are either income tax, gift tax or estate tax levied by the federal government.
The provision for federal tax liens has been provided in the section 6321 of the Internal Revenue Code of United States. The article provides that the government of United States can impose a lien on the property of any person who is negligent or deliberately refuses to pay the lawfully imposed taxes on him or any associated interest or penalties levied by any legally appointed authority. The lien shall be applicable in favor of US government, and it shall be applicable on both real and personal property.
The period for which the lien shall be in force is defined in the section 6322 of the Internal Revenue Code of United States. The law says that unless there is a specifically declared period for which the lien has been imposed, it shall be applicable until the taxpayer in question clears all his dues or until such period, after which it becomes impossible to sustain. This means that theoretically, a federal tax lien can apply in perpetuity.
The IRS can only impose federal tax lien after it has assessed the tax liability of the taxpayer, sent a notification and demand to pay the taxes and if no payment is made within10 days of such information. It is only after every single one of these three conditions have been fulfilled that the federal tax lien can arise.
Federal tax lien weighs heavily on the credit rating of a person who is served with the claim. It becomes painfully difficult to buy any property or a new credit card. Even signing a lease becomes a great bother. The federal tax lien attaches itself to all units of property that is owned by the taxpayer or in which the taxpayer has a right. This means that federal tax lien can land anyone in severe financial trouble if mismanaged.
Thankfully an appeal can be made against the federal tax lien in some cases. The conditions include the clearance of all the dues before the claim was imposed or if the application was imposed in the period of bankruptcy. There are some other instances when federal tax lien appeals can be made the most common is where a procedural error had occurred in the assessment of tax liabilities.
If you fail to pay off your real property tax or other taxes, your property becomes subject to foreclosures. You can look for real estate investor financing or tax lien help organizations if you want to get rid of federal tax lien imposed on you by Uncle Sam.