Despite the filing of accurate returns and paying their income taxes, Texans can still find themselves in big trouble with the tax man.
Americans who fail to pay the other tax bills — whether property taxes or other city-issued bills — could find themselves losing their homes over an unpaid debt that might be as small as a few hundred dollars.
The National Consumer Law Center said that in many states, local governments allow investors to purchase tax liens on delinquent properties. By doing so, the government collects its money. But what happens to the property? The investors hold a claim on it, and from there, it can get tricky for the homeowners. First, they must pay off the debt in its entirety, as well as interest to the investor. If they do not do that, the investor can take the home via foreclosure.
A report from the National Consumer Law Center used the case of an 81-year-old woman from another state as an example. In this case, the woman went into arrears on a sewer bill of less than $500. A corporation bought her house for just over $800, evicted her from her home of 40 years and sold it for $85,000.
Another elderly woman who had no one to help her decipher the notices she received in the mail did not respond to the request for the $5,000 she owed in taxes. She lost her house as a result, along with the $150,000 in equity she held.
Their cases are extreme, because most investors who buy the liens look to recoup the interest. In some cases, that can be as high as 50 percent, according to the report.
While high unemployment rates have left many unable to pay their debts, the most at risk of losing a home to a delinquent tax are the elderly, an expert said. Because of advanced age or dementia, some of them just do not understand the process of the legal speak in the paperwork they receive.
Anyone who cannot pay their tax bills should contact the municipality to see if a payment plan can be reached. If not, they should not ignore any correspondence that comes their way. Seeking assistance from a professional might be necessary to save their most precious asset: their homes.
Source: CNN Money, “The other foreclosure crisis: Losing a home over $400 in back taxes,” Les Christie, July 11, 2012