How to Remove A Tax Lien from Your Credit Report

Tax liens are damaging, but not only to your credit. Tax liens result in tax levies; your property is seized by the government because of your tax debts. If this happens, you may end up losing your car, home, or bank accounts, depending on how big your debt is.

Paid tax liens will stay on your report for seven years while unpaid tax liens can remain for an unspecified amount of time. Tax liens on your credit report are just like judgments. Both legally allow your lenders to collect their money from you. In the case of a tax lien, the IRS has legal rights to what you own.

It could be real estate, personal property, business property, or financial assets. You cannot sell your home when you have a tax lien; neither can you qualify for new loans. The tax liens take priority in that if you sell your home, part of the money must be used to satisfy the tax lien. Creditors take tax liens very seriously and it makes them doubt your ability to repay debts.

A tax lien can deduct 80-100 points from your credit score. If you have a higher score, the drop will be more severe. It is difficult to repair your credit after a tax lien because if it is unpaid, it will stay on your report, unlike other negative accounts that drop after seven years. The IRS is responsible for filing the tax liens but not directly reporting tax liens to the bureaus.

The liens are public records just like judgments and bankruptcies. If you want to remove the tax lien from your report, you must deal with both the credit reporting agencies and the IRS. You are never notified that you have a tax lien until it has been put on your credit report.

Bankruptcies do not discharge tax liens unless you file the bankruptcy before the tax lien is attached. Just like other debts, you have the legal right to dispute a tax lien. If the government is unable to prove the debt, you can have it removed from your report.

The government is not quick to ignore disputes even when there are errors in the information. The IRS will either confirm or correct the information and the tax lien continues to stay on your report. If you satisfy the debt, the IRS will “release” it, but the paid tax lien will still be on your credit report for seven years.

Fortunately, there is a way to dispute and have a tax lien removed from your report even when it is not fully satisfied. First, you need to request a “withdrawal”. It is different from a “release” and you can request one while still paying the lien.

You must continue with the payment plan and pay the full amount. This is a great option for someone trying to qualify for credit. To dispute and have the lien removed from your report, you must fill an IRS form 12277. You must work with the IRS and the three credit bureaus if you want the lien removed. 

Tax Liens No Longer Appear on Credit Reports

An unpaid tax lien can stay on your credit reports forever. If it’s paid, a tax lien can be released, then removed from your credit reports after seven years. If a lien is paid and then withdrawn by the IRS, it can be removed from your credit reports entirely.

Lien vs. levy

With a lien on your report, the federal government might see that you have not made an effort to pay back your taxes and also submit a tax obligation levy claim, indicating the IRS would have the authority to assert your property/assets.

A levy as well as a lien are 2 different things: A lien establishes that the federal government has a rate of interest in your building when you have not paid a financial obligation, while a levy really takes your residential property as a way to work out the financial obligation.

Tax liens are part of the public document per state legislations, so having a tax lien on your credit report can affect your ability to purchase residential or commercial property, secure loans, obtain credit report cards, etc, as stated previously. Also, re-financing will not be a choice. You will not be able to do so until you’ve paid the tax obligations you owe if you desire to refinance your mortgage.

Plus, even if you apply for insolvency protection, your tax debt or lien may proceed later.

There are a lot of factors to resolve your tax obligation financial debt with the IRS. Luckily, you can take steps to do so and decrease the influence a lien will certainly have on your credit report.