Federal Tax Lien

California And Tax Lien Certificate Sales

As in most states, in California too levies, liens and offsets are the instruments used by the IRS to collect unpaid taxes.

When using a tax lien the IRS claims the tax payer's property as security until the tax dues are cleared. It makes a public announcement regarding this claim and consequently informs present and future creditors about the tax payer's status. Once the dues are settled to the satisfaction of the IRS, the tax lien is released.

With tax levies, the IRS lays a claim to the property at once. It can then sell off the property to settle its dues. Property would include personal property as well as real estate.

An offset occurs when the IRS deducts the unpaid taxes from any refund that is due to the tax payer. The refund could be from another government agency.

In many states Tax Lien Sales are conducted by the government to sell off tax liens through a public auction. There is competitive bidding and the tax lien is sold to the investor who is ready to accept the lowest rate of interest. The tax liens are sold to private investors in the form of tax lien certificates. The investor now collects the payments from the errant tax payer. The investor is attracted by high rates of return and the possibility of being able to acquire the property. The government too is happy as it receives its dues and does not have to spend resources trying to recover them.

Unlike many other states, California however does not conduct tax lien auctions. A 1995 law does authorize tax lien certificate sales in the state. However none of the counties have initiated them and thus no tax lien certificate sales have been held so for.

California does hold tax sales. But these involve sale of tax deeds but not tax lien certificates. In recent times the area around San Francisco is contemplating holding tax lien certificate sales.

It has been estimated that if sales were held for tax lien certificates in California, the interest rate would be 18% and the redemption period between 2 to 3 years. However this would vary county to county.

California holds its tax deed sales throughout the year. Most occur during the period between February and May. The rules of the sales vary from county to county but all the tax deed sales are conducted on the basis of competitive bidding. A potential investor can search the internet or through the county's administration offices for specific information relating to tax deed sales in each of the counties.

As a state California is viewed as being one of the best for tax deed sales. However, substantial capital is required if one wants to invest here as property values are quite high.