Tax lien removed from credit report

Tax lien removed from credit report

A federal tax lien is one of those stubborn things that can stay on your credit report for years – actually seven full years after they have been paid in full.

With a tax lien on your credit report, you may as well stamp “denied” on new credit applications. Not only will your credit score drop by between 50 and 200 points, you’ll also have a very hard time convincing anyone to lend you a penny. The purpose of a tax lien is to give the government first “dibs” on your assets for settling debts. And when Uncle Sam calls dibs, lenders back way off.

But all hope is not lost! Back in 2011, the IRS put in place a program that allows you to have your tax lien removed from your credit report – even if you are still paying it off! Here’s how:

How to Erase a Tax Lien from Your Credit Report

Step 1: Figure out if you have paid the lien off in full or not.

Step 2: If the lien has a zero balance, fill out IRS form 12277 (668Y) https://www.irs.gov/pub/irs-pdf/f12277.pdf, check the box for “Released” on line 10, mark the last option for line 11 (the taxpayer believes withdrawal is in the best interest of the taxpayer and the government), attach a copy of your release notice from the IRS (if you have it) and send it in.

Step 3: If the tax lien still has a balance left on it (and you owe less than $50,000 total in all back taxes including the lien), contact the IRS to set up a payment plan with automatic payments deducted monthly from your bank account. (If you don’t have a bank account, you will have to get one for this to work.) You can go to https://www.irs.gov/individuals/payment-plans-installment-agreements to find links to the forms you’ll need to apply by mail. You can also apply online at https://www.irs.gov/individuals/online-payment-agreement-application.

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Step 4: Once the direct debit payment agreement is in place AND you have made at least three payments, fill out IRS form 12277 (668Y) https://www.irs.gov/pub/irs-pdf/f12277.pdf, check the box for “Open” on line 10, mark the second option for line 11 (the taxpayer has entered into an installment agreement…), also mark the box just below that indicates you have direct debit set up, and send it in.

Step 5: In either case, you will receive a response from the IRS in several weeks. If your withdrawal is approved, you will receive a notice from the IRS with Form 10916(c), Withdrawal of Filed Notice of Federal Tax Lien. Send a copy of this form to each of the three credit reporting companies with a brief letter requesting the lien be removed from your credit report.

Experian, P.O. Box 4500, Allen, TX 75013 or online at experian.com/upload.

Transunion, Consumer Dispute Center, P.O. Box 2000, Chester, PA 19016 or online at https://dispute.transunion.com.

Equifax Information Services LLC, P.O. Box 740256, Atlanta, GA 30374 or online at https://www.experian.com/disputes/main.html

Step 6: In 4 to 6 weeks, you’ll get a response from the credit reporting companies. Be sure to check your credit reports to make sure the lien is removed!

4 Ways to Boost Your Credit Score Fast

If you have any questions, please give us a call at 770-952-5168 or contact us online.

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This information is intended for informational and educational purposes only and not as legal advice. If you have concerns about your credit report, harassment, identity theft, illegal collections activity, garnishments, or property liens, you should consult an attorney who specializes in consumer rights and defense.


How tax liens affect your credit score

By Brady Porche | Published: March 16, 2017

Focusing on credit scores and what consumers can do to improve them

Tax lien removed from credit report

Many tax liens will soon be removed from credit reports, but the ones that remain can severely damage your credit score.

If the government has filed a tax lien against you for not paying income, property or other taxes, it can indicate to creditors you’re a potentially risky borrower. Failure to pay your taxes may give the impression to potential lenders (or even future employers) your finances are in distress or you’re prone to forgetting or ignoring payment obligations.

But if you get hit with a tax lien, there’s a good chance it will never appear on your credit report. The three major credit bureaus – Equifax, Experian and TransUnion – will begin excluding or removing many liens and nearly all civil judgments from consumers’ credit reports starting in July.

Liens and judgments will be left off credit reports if they don’t include the consumer’s name, address and either a Social Security number or date of birth. The decision covers new and existing tax liens and judgments. Eric J. Ellman, interim CEO of the Consumer Data Industry Association, said in an emailed statement about half of all public tax lien data may not meet the new standards.

If a lien does get added to your credit report, its credit score impact is difficult to quantify as it’s just one part of your financial history. Under FICO’s traditional model, your credit score depends on a mix of factors, including credit card and loan payment history, credit utilization, length of credit history and more.

“The impact a tax lien has on a consumer’s credit score depends on the consumer’s unique financial history, as well as the credit score model that’s being used,” said Chris Hobday, vice president at Equifax.

However, “A tax lien is considered a severe derogatory entry, just like bankruptcies, judgments, collections, charge-offs and repossessions,” said John Ulzheimer, a credit expert who has worked for FICO and Equifax. “Their influence can be as little as nothing or as much as over 100 points.”

Credit bureaus get tax lien updates from courts, similarly to how they receive credit information from banks and lenders.

“We receive updates on tax liens on a regular basis, and we match this information to the appropriate consumer’s credit file,” Hobday said.

When a consumer satisfies a tax lien by paying what he owes, Equifax typically updates the credit file within one day of being notified, Hobday said. A lien is released 30 days after payment, according to the IRS. However, settling an unpaid tax debt doesn’t immediately remove the lien from your credit report. A paid lien can remain on your credit report for up to seven years after it’s been released, and an unpaid lien stays for up to 10 years after it was originally filed.

Tax liens are treated similarly to other negative public record items in FICO’s formula. While FICO does not specify the credit score impact of a tax lien, bankruptcies and foreclosures can cause your credit rating to plummet. A bankruptcy can cost someone with a credit score of 780 as many as 240 points, and it can take that person up to 10 years to fully recover. A foreclosure can cause a 140-point drop to someone with a score of 780, and they may not recover for seven years.

Paying your credit cards and loans on time and keeping balances low is the best way to minimize credit score damage if you’re hit with a tax lien. However, there is a way to get a tax lien removed from your credit file, which could blunt any negative impact to your credit score.

The impact a tax lien has on a consumer's credit score depends on the consumer's unique financial history, as well as the credit score model that's being used.


How To Remove Tax Liens From Credit Report

Tax lien removed from credit reportIt’s scary getting a tax lien. It’s going to decimate your credit score, along with potentially placing your property, assets, and even bank accounts at risk. Because unpaid tax liens can become tax levies which puts your property, assets, and even income in jeopardy with the potential of wage garnishment.

Moreover, state tax liens have different rules than federal tax liens from the IRS, and you may have a county tax lien too. And we need not even mention the nauseating government waste of our tax money, or outrageous national debt, or the fact that responsible, honest, hard-working folks have to pay the burden for other less-productive individuals in our society.

Nevertheless, this is the world we live in. And while we’re all waiting with bated breath for tax reform to happen in hopefully the coming months, there is hope, regardless of what our so-called representatives choose to do.

Extra! Extra! Just the other day, July 1st, 2017, changes with all three credit bureaus went into effect, these changes will make it easier than ever before to remove public records from credit report files. Tax liens, judgements, bankruptcies, foreclosures, and more, are public records.

As a result of more stringent data requirement standards by the three major credit bureaus, these items are easier to remove today, than ever before. Feel free to check out the full Consumer Data Industry Association press release.

In essence, this information must now contain a minimum of identifying information including: name, address, and Social Security number or date of birth. Along with requiring these records to be updated with manual courthouse visits every 90 days.

M any liens, some folks claim up to 50% of tax liens, don’t contain this information. Often, Social Security numbers are redacted for privacy purposes. This means it’s never been easier to remove tax liens from credit report files, regardless of the current status or if the debt is paid or unpaid.

We must warn you, even if you’re successful removing a tax lien, often you’ll still be responsible for payment. However to not be buried with a bad credit score, while you take action on resolving this debt, is amazing! We can’t stress, how big of a change this is, and enthusiastically encourage you to take action to remove tax liens, fix bad credit, and immediately.

Of course, there is no guarantee, but your odds have never been better to remove this negative item from your credit reports. The remainder of this article we’re going to talk in depth about tax liens, and how to remove this item, along with wise methods of repayment.

However, these credit bureau changes, are literally a game changer. And we strongly encourage everyone with public records including tax liens on credit report files, to take action with repairing credit. You can do this yourself or with the help of professional, legal, and legitimate credit repair companies.

One of the best firms is The Credit Pros. They’ve helped client’s remove public records, including tax liens, judgements, bankruptcies, and many more negative credit report items. Get a free credit consultation with a certified FICO professional by calling toll-free 1-877-418-7596.

A tax lien regardless if it’s on the federal, local, or state level is the government’s legal claim against your property. Essentially it says the taxing authority is first in line to get paid, before any other creditors or lenders. By the way, a Notice of Federal Tax Lien (NFTL) will be automatically assessed if you owe the IRS $10,000 or more.

This is why it has such a devastating impact on your credit score, because creditors won’t see viable options to recoup a defaulted credit line, because the tax lien holds precedence. Knock on wood, if a tax lien becomes a tax levy, you’ll be notified.

The IRS will send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. The IRS is required to notify you at least 30 days prior to initiating a levy. Tax levies can be in the form of wage garnishment, holds on your bank account, property seizure, 1099 or tax refund payments, retirement accounts, dividends, life insurance, and much more.

However, there is some assurance you can take that there will often be a considerable period of time between when a tax lien, goes into the levy stage. And obviously, if possible, let’s try to minimize the frustration, annoyance, and damage this issue causes to our day to day life.

How Long Does a Tax Lien Stay On Your Credit Report?

Tax liens are different than every other type of negative credit item. With unpaid tax liens, they can potentially remain on your credit report forever. However, it’s rumored that after 15 years, folks will usually see the item removed from their credit report.

Experian even says they remove unpaid tax liens, after 10 years. But this is no guarantee. The Fair Credit Reporting Act (FCRA) doesn’t specify the maximum amount of time, unpaid tax liens can remain on your credit reports.

This is the federal legislation that does govern and regulates, all other negative credit report items. It clearly says the maximum amount of time those items can stay on your credit reports, typically seven to 10 years.

Paid tax liens, however, can legally remain on your credit report for seven years after the lien was released. In other words, after payment was made. However, the good news is the IRS offers some methods to remove tax liens for certain folks and under specific circumstances under the “Fresh Start” program which will share in detail, coming up.

On a sidebar, the taxing authority (IRS, state, or local government) is not the company reporting this information to the three major credit bureaus. In other words, unlike banks and collection agencies, the taxing authority is not what’s called a data furnisher.

Instead, tax liens are public records, just like judgements, and bankruptcies. This information is either gathered from a third-party company whose job is to acquire this information and then share it with the credit bureaus, or directly reported by the court house, depending on your circumstances.

The Status of Tax Liens On Credit Report

There are three types of status marks assigned to a tax lien on your credit report. And we share this, because it will directly determine your next steps, and how to remove a tax lien from credit report files. This status information is placed next to the tax lien on your credit report, or what the industry calls a tradeline.

As we’ve shared unpaid tax liens are the worst. They will destroy your credit, and cause a poor credit score, and make it virtually impossible to get approved by lenders and creditors.

Because with unpaid liens, they can become tax levies. And any potential lenders or creditors, will be well aware they’d have to let the government recoup their money first, before they’d even have a chance at payment.

These items can potentially remain on your credit reports, forever. And on the tradeline on your credit report, it may say something along the lines of “state or federal tax lien filed.” This means unpaid.

Your tax lien will be released when payment is made. In other words, once you pay off this tax lien, the taxing authority will release it. This will improve your credit score, however, it’s still a very negative item to have on your credit reports.

With released tax liens, the item can remain on your credit reports for seven years from the date it was paid or released. The takeaway and reason lenders will view you in a better light, is because the government has released the legal claim to your property.

This is our goal. Because when a tax lien is withdrawn it can and should be removed from your credit reports. Having a clean credit report is key, because these negative credit report items are what’s frequently damaging and dragging consumer’s credit scores down.

And when your tax lien is withdrawn it will be as if you never had this item on your credit file. There is an effective Fresh Start program offered by the IRS to help folks get their federal tax lien withdrawn, that we’ll share in a moment.

However, this program doesn’t apply to state tax liens, that said, some states do offer a way for residents to have tax liens withdrawn. For full details check with your respective tax office in your state of residence.

How To Remove Tax Liens From Credit Report

We’re first going to share the overall process to remove tax liens from credit report files. And then we’ll finish up this article with details about the Fresh Start program for IRS tax liens, and how to go about getting this lien withdrawn for the folks that qualify.

The very first step is to grab a current updated copy of all three of your credit reports. You can do this for free by visiting annualcreditreport.com. We want to check the tax lien on your respective credit reports with Experian, Equifax, and TransUnion along with the balance. On a side, this will also show you the status of your tax lien.

The second step is to contact either your local, state, or county tax office, or the IRS directly. We want to confirm the total balance, and then take action to pay off this debt. Obviously, you can make payment in full, and all of these tax authorities will be willing to set up repayment plans.

In other words, payments over a period of time. If you have state or county tax liens, we encourage you to ask if your state tax office provides residents with a way to have the tax lien withdrawn.

Once your tax debt is paid, and sometimes simply entering into the repayment plan, depending on your state of residence, will give you the opportunity to get a paid-in-full or release of the tax lien letter directly from the tax authority.

This is an important document that we’ll need in order to potentially remove the tax lien from your credit reports. And at the very least, have an accurate status assigned for the item on your credit reports.

In this next step, we’re looking at how to dispute credit report items, this is your right as a consumer granted by the FCRA. This is how you challenge an item on your credit file, and we’re going to do this directly with each of the three major credit bureaus, assuming the tax lien is reported on all three of your credit reports.

You can file your credit report dispute online, over the phone, or by mail. Obviously, we’re going to dispute the tax lien on your credit report. We recommend doing this by mail, because we’re going to include copies of your release or paid-in-full letter from the respective tax office, as evidence to support your dispute.

If the tax lien is simply released, this will at least, ensure a timely update. Rather than waiting till the credit bureaus figure out your tax lien was released on their own, because as we’ve mentioned it’ll be on your credit file for seven more years, from the date it was released.

On a sidebar, if you have one of those rare circumstances where you believe there was a problem with the tax lien, stolen identity, or some other act of a higher power, we suggest disputing the tax lien on your credit report as one of the first actions. Because if the item isn’t on the level, it will have to be removed from your credit reports.

Once the credit bureaus get your dispute, and they first have to find it valid, which is another conversation for another time and place. So make sure to sign up for our free newsletter for more credit score help and join our congregation.

Once the credit bureaus get your dispute and deem it valid, they’re required to investigate the item. During which they’ll contact the third-party company or data furnisher, that supplied them this information, or the court house directly and request verification of the account.

If your tax lien was released, then this will be updated on your credit reports. And while it’ll still cause you to have a low credit score, you’ll be a lot better off than if your tax lien was still showing the status of unpaid.

If your tax lien is withdrawn or not verified then the credit bureaus, in compliance with the FCRA, will have to remove the item from your credit reports. This is how to clean up credit report dings, blemishes, and remove any negative items, and do so legally.

In full disclosure, the credit bureaus aren’t required to remove tax liens that have been withdrawn. However their current policies, and you can rest assured, continued operating policies and procedures will result in them removing the tax lien from your credit reports.

This is how to clear your credit and remove tax liens. Or worst case scenario at least gets this seven year time window moving, and minimize the time this tax lien will remain on your credit files, and damage your credit worthiness. And even a released tax lien mark will help to fix your credit score.

Beware, you may have some trouble getting the credit bureaus to deem your dispute valid, and in turn, investigate the item. The reason for this is simple, it costs the credit bureaus money to investigate consumer disputes. The only reason they do investigate is because the FCRA, requires it.

In 2015, all three credit bureaus Experian, Equifax, and TransUnion, agreed to a settlement and payment of $6 million to 31 state attorney generals. This is a result of their reluctance, and debatable total disregard for consumer rights under the FCRA. Check out a press release from the Consumer Financial Protection Bureau (CFPB) about just how challenging the credit dispute process is.

Many people believe the credit bureaus are part of our government or have some righteous standing. They don’t. They’re private for-profit businesses, just like any other business. You can buy stock in two of the major credit bureaus, today. Remember, this is your consumer right, protected by federal law.

As just one quick example of the unbelievable brick walls that consumer’s encounter trying to fix credit, is in 2013 when a woman, Julie Miller discovered a random stranger’s 38 collection accounts for some reason appearing on her credit reports. Julie invested two years, doing what she’s supposed to do, and going thru the dispute process.

Repeatedly Equifax kept finding her dispute frivolous and responding by asking for more information. Julie complied and sent them W-2’s, pay stubs, tax returns, hair samples, DNA, her first born child and they continued to ignore federal rules and regulations. And yes, that’s an obvious small exaggeration, she didn’t send them her children.

Long story short, she sued Equifax and a jury awarded her over $18.6 million in a settlement. This amount was later reduced to a total of $1.8 million by a federal judge. However the punitive damages, this is the penalty award, was nine times more than the actual compensatory damages, which is to make your life right again, the actual damage done to your day to day life.

This is just an example of the type of behavior it’s possible you’ll encounter from the credit bureaus, while trying to repair credit, even the most obvious of errors. They’re not your friend and our government has sued all three credit bureaus, time and time again for violating consumer rights under the FCRA. One of many reasons it’s wise to get professional credit repair help.

The IRS Fresh Start Program For Federal Tax Liens

In 2011, the IRS introduced the Fresh Start program to help tax payers, and give them an opportunity under certain circumstances to have a tax lien withdrawn. They’ve made changes to this program to apply to more people.

We believe because of our unbelievable tax rates, and unreasonable view point of burying our productive citizens in massive mountains of debt, so we can give that money to just under half the rest of the population. Insanity. Nevertheless, today there are three ways to pay off IRS tax liens, and qualify for the Fresh Start program and withdrawal.

You can pay your tax debt in full, set up a Direct Debit Installment Agreement or automatic monthly payments, or settle the tax debt with an Offer in Compromise. Along with meeting other criteria. Check out more details with the IRS press release.

How To Qualify For IRS Tax Lien Withdrawal

If you’ve paid your IRS tax lien in full, and have complied with all tax filings within the past three years, along with being current on estimated tax payments and federal tax deposits, if applicable. Then you can qualify for a withdrawal.

If you instead choose to set up a Direct Debit Installment Agreement, or pay this IRS tax lien with monthly payments, you can potentially quality to have your tax lien withdrawn and after making just three payments. You’ll also have to: owe $50,000 or less, pay off this debt within 72 months (6 years), are compliant with all other IRS payment and filing requirements, and haven’t defaulted on current or past Direct Debit Installment Agreements.

This is a way to settle your tax debt for less than your total balance, called an Offer In Compromise (OIC). And it’ll only be accepted if it represents what the IRS can expect to collect within a reasonable amount of time. In other words, you’ll have to prove you can’t pay off the tax lien in a lump sum or through a payment agreement.

And only after the IRS analyzes your current financial circumstances including income, assets, etc. This is for extreme cases, because unlike collection agencies, the IRS demands payments, and if they can get it, they will. You really have to be in a very difficult financial position to qualify for this.

If you meet the above criteria, you won’t automatically qualify for an IRS tax lien withdrawal. You’ll next need to request withdrawal directly from the IRS, and as you’ve surely guessed, you’ll need to fill out government forms. Specifically, the IRS Form 12277 Application for Withdrawal of Notice of Federal Tax Lien is what the form is called.

If the IRS approves your request, they’ll record a copy of Form 109169 or what’s called Withdrawal of Filed Notice of Federal Tax Lien with the county recording office, along with mailing you a copy. And this isn’t even the end of the process. There’s still one more step left to clear credit file.

Remove IRS Tax Lien From Credit Report After Withdrawal

The last step is to notify the credit bureaus, through the credit report dispute process, we shared earlier. And this time we need to send the credit bureaus a copy of your Form 109169 or Withdrawal of Filed Notice of Federal Tax Lien as evidence to support your credit report dispute. Once the credit bureaus get this information and comply with federal law, they’ll remove the IRS tax lien from your credit reports.

As you’ve certainly figured out by now, removing tax liens from credit report files, is far from an easy task. Heck, 60 Minutes in recent years, aired a segment showing just how downright next to impossible it is for the everyday American to even dispute credit report items.

Not to mention multi-state investigations that lead to $6 million settlement agreement, in 2015. The credit bureaus claim to have changed their ways, but we wouldn’t recommend holding your breath. The credit bureaus have created an estimated $4 billion per year industry.

Don’t let us get started with our bloated government, and their clear desire to have zero accountability for the billions and trillions of dollars they spend on mere whims. This is the current state of affairs in our great American country. Hopefully, things are changing.

At the end of the day, your credit score is very much like your Grade Point Average (GPA) in school days past. It matters not if you’re acing all your courses, if you’re failing The Art of Walking, a real college course by the way. Because this one negative mark is going to ruin your overall GPA.

This is also true of your credit score. FICO very clearly and openly shares this. And this is precisely why we must clean up credit report dings, blemishes, and remove negative credit report items. And given, these new data requirements that went into effect on July 1st, 2017, removing tax liens has never been easier.

It’s no guarantee, but you have better odds today than ever before. We encourage our members to consider professional, legal, and legitimate credit repair companies to help. Because in 2016 alone, over 9 million negative items were removed from consumer’s credit reports.

One of the best credit repair companies is The Credit Pros. They’ve helped client’s remove tax liens, collections, late payments, charge offs, judgements, and many more negative credit report items. Check out our Credit Pros review article for full details.

Get a free credit consultation with a certified FICO professional by calling toll-free 1-877-418-7596. And for more tips, techniques, and strategies about how to improve credit score with Dan Willis, sign up for our free newsletter and join our congregation.

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How to remove a tax lien from your credit report?

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Your credit history shows creditors how you handle debt. but other negative information sneaks onto the report too. This includes information about Federal income tax liens.

An unpaid tax lien represents a derogatory mark that will anchor your credit score. Even a paid tax lien will affect your credit score for seven years. But you can remove a tax lien from your credit report. This is how.

An unpaid tax lien for Federal Income taxes can stay on your credit report forever. It will persist through bankruptcy and other credit catastrophes. It is the only negative mark that could stick on your credit report indefinitely. Although, in practice, most credit bureaus remove information about unpaid tax liens after ten years.

Paying a tax lien means it will fall off your report seven years after you complete payment. However, that’s not the fastest way to remove a paid tax lien from your credit report. Paying the tax lien in full satisfies your obligation to the Federal government, and it opens up the possibility of enrolling in the IRS’s Fresh Start Initiative.

The Fresh Start Initiative is a program where the IRS will withdraw their tax lien if you meet certain conditions. As soon as the IRS completes the withdrawal, you will no longer see the tax lien on your credit history.

If you cannot pay the tax lien, set up a Direct Debit Installment plan to payoff the tax lien. The payment plan opens you up to the Fresh Start Program under certain conditions.