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How Does Federal Tax Lien Affect Credit Report

If you have an outstanding debt that you owe to the IRS, it may wind up on your credit report in the form of a Federal Tax Lien (“FTL”).

What is a Federal Tax Lien?

A FTL represents the government’s securitization, or claim, on or against your property for not paying a tax liability.  FTL’s can negatively impact your credit score and likely make it difficult for you to be approved for credit or loans.

Where is a tax lien shown on a credit report?

A FTL’s appear in the public records section of your credit report.

What is the amount due?

The amount listed on your FTL is not the current balance of the amount due to the IRS.  The amount shown on the FTL is the amount from when the lien was origionally filed.  To obtain the current balance, you can contact the IRS Centralized Lien Operation group at (800) 913-6050.

What can you do if a tax lien appears on your report that’s not yours?

If the lien doesn’t belong to you, you can go through the dispute resolution process to request that it be removed from your credit report.  This could mean having to make a request through each of the credit bureaus depending on which credit reports list your tax lien. They should look into the issue within 30-45 days.

What can you do if you paid off a tax lien, but it appears on your report as unpaid?

If the lien has been paid but that is not reflected on your credit report, you can go through the dispute resolution process with the credit reporting agencies and submit a copy of the “Certificate of Release of Federal Tax Lien” as well to request an update to their records.

If you pay the debt you owe, the IRS will likely release the lien within 30 days of payment. This should be marked as paid, but will probably not be removed from your report right away as even paid liens may remain listed as informational items for about seven years (unpaid liens may stay for ten years). Removing a paid lien from your credit report will likely have a positive impact on future credit applications, so it is in your best interest to go through the withdrawal request process if you qualify.

How do I request that a lien be withdrawn from my credit report?

If the lien is valid, there may be an opportunity to have it removed from your report if you meet the criteria. If you have paid the debt, you also need to be up to date with your current year estimated taxes (and deposits) and with filing your taxes the last three years. It is also possible to have the lien taken off your report even before the debt is paid. To do this, you must be paying your debt via direct debit installment agreement and the balance must be below $25,000. A complete set of requirements may be found on the IRS Website.

McCauley Law Offices can help!

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