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Back Taxes Can Pile Up without Your Knowledge

Every owner of real property has to pay property taxes. There are a few exceptions, of course. For example, the property of governmental units, schools, charities, churches, and certain other non-profit organizations is exempt from taxation so long as it is not used for profit-making purposes. Some states also have limited exemptions for indigent widows, orphans, veterans and the like. But, in general, if you own real property you can expect to pay an annual or semi-annual property tax.

Lack of Notice
What happens if you do not receive your tax bill for one or more years, and the back taxes begin to pile up? After a few years the bill can become huge when interest and penalties are added in.

This unfortunate state of affairs seems to occur with some regularity. Usually, the problem occurs because the tax bill is sent to the wrong address. The property owner may move and forget to tell the assessor, which often happens. The tax bill may be sent to a lender who pays the taxes out of an impound account. After the loan is paid off, the lender may fail to tell the assessor, and the tax bill will continue to be sent to the lender, who just ignores it. Sometimes the treasurer just makes a mistake in transcribing his mailing list. Whatever the cause, you can be blissfully unaware of the taxes piling up until it is too late. Believe it or not, it is actually possible to lose your property to taxes without ever having received actual notice.

Is This Constitutional?
You might ask how a property owner can be stuck with interest and penalties or lose his property if he never received a tax bill. That's a good question. The Fifth Amendment of the Constitution provides that property may not be taken without "due process of law." The first requirement of due process is notice. One can hardly be said to have received due process if he is never notified of a pending procedure to take his property. On the other hand, the government must have dependable tax revenues to operate, and one should not be able to avoid taxes by failing to tell the county treasurer where he lives.

To resolve this problem the courts have developed a flexible standard for determining when adequate notice has been given. In criminal cases, where a person's life or liberty may be in jeopardy, actual notice is nearly always required, usually by arresting the person and bringing him before a judge. In a civil suit, the requirements for adequate notice are also strict, usually requiring personal service, but in certain circumstances "constructive notice" may be allowed. This might consist of publication in a newspaper if the party cannot be found and served. However, in the case of a tax levy, the requirements are generally much more lax. As long as the taxing authority provides for some kind of reasonable notice and an opportunity to be heard, it is likely to be considered adequate.

Most states have statutes providing for something less than actual notice when it comes to taxes. Typically, the statutes will provide for publication in a newspaper for several weeks, together with mailed notice to the taxpayer's last known address. It is up to the taxpayer to keep the treasurer informed of his current address and to make sure his taxes are paid when due.

In many states, the statutes provide for notice by publication. Of course, the county treasurer sends you a tax bill, but it is not a legal requirement.

Mortgage Holders
Mortgage lenders often require the tax bill to be sent to them so that they can insure that the taxes are paid. Unfortunately, many lenders fall into the habit of ignoring the tax bills after the loan as been paid off, not bothering to notify either the county treasurer or the borrower. This allows the tax bills to pile up if the property owner fails to realize he has not been receiving his tax bills. When the property owner finally learns of the mistake, the amount owed can be huge.

If you are a property owner, make sure you know the status of the taxes against your property, and check up on it every year or so, even if your lender is paying your taxes through an impound account. This is especially true if you own multiple properties, because it is easy for one property to slip by unnoticed. Do not assume that everything is all right just because you have not received a notice that taxes are past due. If you change your address, be sure to notify the assessor. Remember, it is the property owner's responsibility to make sure his taxes are paid.

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