Tax Lien University

A general discussion on the taxation process will help you understand the context from which tax liens and tax deeds originate.

The collection of real estate property taxes is a major priority for local counties and municipalities. Delinquent property taxes create a serious cash-flow problem for local governments. If the county or taxing district is unable to collect property taxes, it is also unable to fund important government services like public schooling, police protection and, in some cases, medical services. Without the revenue generated from real estate property taxes, the county would literally go bankrupt.

Adoption of Budget

The taxation process begins with the adoption of a budget by the county or municipality. The budget outlines the financial requirements for the next fiscal year. The budget includes an estimate of any anticipated expenditures and income for the coming year. Any additional income needed to fund the budget will be raised from real estate property taxes.

Appropriation

Appropriation is the way a county or municipality authorizes the proposed budget, including expenditures and revenue sources. The process begins with the adoption of an ordinance that outlines the specific terms and conditions of the proposed taxation.

Tax Levy and Tax Rate

Through a tax levy, the extra money needed to fund the budget is passed on to local property owners. To do this, the county or municipality must generate a tax rate. To arrive at a tax rate, the total amount of money needed is divided by the total assessments of all real estate located within the taxing district.

For Example: Maricopa County, Arizona determines that $500,000 must be raised from real estate taxes. The Assessor’s Records indicate that there is $10,000,000 in taxable real estate within the county. So, the county computes the tax rate:

$500,000 divided by $10,000,000 = .05 or 5%

The tax rate may be stated in a number of ways. Generally, it is expressed in mills. A mill is 1/1,000 of a dollar, or $ .001. The tax rate may be expressed as a mill-per-dollar ratio, for instance in dollars per hundred or in dollars per thousand. A tax rate of .03 or 3 percent could be expressed as 30 mills or 3/1000ths of assessed value.

The Assessor

The County or Municipal Assessor is responsible for discovering, listing and valuing all property within the county, and must follow state laws when meeting these responsibilities. The assessor’s goal is equalization of property values. Equalization allows the burden of taxes to be distributed fairly and equitably among property owners.

Notice of Valuation

Each year the assessor is required to notify taxpayers of the value of their real property. The notice, or valuation, describes the property, gives the actual value for both the prior and current year, and provides an opportunity to present an objection of the assessor’s valuation.

The deadlines for appealing a valuation are enforced by state statutes.

The “Notice of Value” is not a bill, but a document that contains important information about the property and its value, which is used to determine each homeowner’s real estate tax bill.

It is the assessor’s job to identify and appraise all real estate, both business and personal property, throughout the county or taxing district and then notify the owners of their findings through the “Notice of Value.”

Throughout the year, appraisers who are employees of the Assessor’s Office travel throughout the county gathering property information to determine its value. The results of their efforts are shown on the “Notice of Value.”

Appealing The Tax Assessment

As home values increase, so do property assessments. A higher assessment means owners will pay more in property taxes. If a homeowner feels that the value the assessor has placed on their property is incorrect, they may file an appeal.

Taxpayer

Property owners have specific rights, remedies and responsibilities in the assessment process. As stated earlier, if they disagree with the property value, they can file an appeal with the assessor. In addition, they have the responsibility to provide accurate information to the assessor about any property they own and to participate in budget hearings held by school boards, cities, towns and special districts which levy taxes on their property.

Tax Bill

A property owner’s tax bill is computed by applying the tax rate to the assessed valuation of the property.

Generally, one tax bill that incorporates all real estate taxes levied by the various taxing districts is prepared for each property. In some areas, each taxing body prepares separate bills. Sometimes, the real estate taxing bodies may operate on different budget years so that the taxpayer receives separate bills for various taxes at different times during the year.

For example, if a property is assessed for tax purposes at $90,000, at a tax rate of 3 percent, or 30 mils, the tax
will be $2,700 ($90,000 x .03).

If an equalization factor is used, the computation with an equalization factor of 120 percent will be $3,240:
$90,000 x 1.20 = $108,000, then ($108,000 x .03 = $3,240).

The due dates for payments (also called the penalty dates) are usually set by statute. Taxes may be payable in 2 installments (semiannually), 4 installments (quarterly) or 12 installments (monthly). In some areas, taxes are due at the beginning of the current tax year and must be paid in advance (for example, the year 2000 taxes must be paid at the beginning of 2000). In other areas, taxes are payable during the year after the taxes are levied (2000 taxes are paid throughout 2000). And, in still other areas, a partial payment is due in the year of the tax, with the balance due in the following year (2000 taxes are payable partly during 2000 and partly during 2001).

Some states offer discounts to encourage prompt payment of real estate taxes. Penalties, in the form of monthly interest charges, are added to all taxes that are not paid when due. In addition, the property cannot be sold or refinanced until the tax bill or tax lien has been cleared.

Massive Success,

Steven E. Waters
Creating Wealth Without Risk™

http://www.taxlienuniversity.com/

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