tax sale

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Tax sale is the forced auctioning of property or liens on property owned by a taxpayer with back taxes. A tax sale generally is a last resort method for the Internal Revenue Service (IRS), state, or local tax agency to reclaim unpaid taxes, and they occur long after a taxpayer falls behind on tax payments. The most common form of tax sale involves selling the actual property in a public auction with the proceeds covering the unpaid taxes and any remaining proceeds going back to the taxpayer or their creditors. Usually, the taxpayer has a short grace period after the sale of the property to pay to the buyer the amount they paid at the auction and regain ownership. Another type of tax sale is called a tax lien sale in which the government agency sells a lien on the property to a creditor. The property owner will have to pay periodic installments and interest to the lien holder to cover the unpaid taxes. 

[Last updated in October of 2021 by the Wex Definitions Team]