If you noticed an increase in your credit score, possibly up to 30 points, you are not
going crazy! Your score may have gone up due to improved standards for utilizing
new and existing public records. The three major credit bureaus: TransUnion,
Equifax, and Experian, are now EXCLUDING all tax liens from credit reports. A study
by the Consumer Financial Protection Bureau (CFPB) recommended changes to help
consumers after Rinding problems with credit reporting. This resulted in credit
reporting companies removing civil judgment data last year and now, tax lien data.
The IRS states a federal tax lien as “the government’s legal claim against your
property when you neglect or fail to pay a tax debt”. In layman’s terms, if you fail to
pay taxes owed, the IRS will send you a bill for the debt. If you neglect or fail to pay
in time, the IRS will Rile a public document known as the Notice of Federal Tax Lien,
to alert creditors that the government has a legal right to your property.
Uncle Sam does not play.
A tax lien would negatively affect you by limiting your ability to get credit. Credit
scores play a huge role in our lives by determining the interest rate we will pay and
whether we will even get approved for a car loan, mortgage or credit card in the Rirst
place. Liens are attached to all of your assets including property, vehicles, and any
assets you may acquire during the duration of the lien. Liens also attach to all
business property and rights, including accounts receivable.
For lenders, the downside to tax liens no longer reRlecting on consumer reports is
that it will make it difRicult to better assess a person’s ability to repay debt. Since this
information is eliminated from credit reports, lenders may consider giving you a
loan, while you are still repaying a tax lien obligation. However, some creditors may
still consider this debt, such as mortgage lenders. Remember, it is still a public
record and all it takes is a bit of searching to Rind. And, just because tax liens will be
excluded from your credit report, does not mean you no longer owe this debt…
So how can you get rid of a tax lien?
The best thing you can do is avoid the federal tax lien in the Rirst place by Riling and
paying your taxes in full and on time. I understand that life happens and you may be
in a situation where you cannot Rile or pay, but if you receive any letters from the IRS,
please do not ignore them! The IRS offers payment options that can help you. On
their website, they offer a payment plan through monthly installments, an offer in
compromise to settle the tax debt for less than the full amount, and even temporarily
delay collection until your Rinancial condition improves.
You can learn more about these options here: https://www.irs.gov/payments
Paying your tax debt in full is another way to get rid of a federal tax lien, and the
IRS will release your lien within 30 days of payment.
A discharge of property will remove the lien from speciRic property and several
provisions of the Internal Revenue Code determine eligibility. These discharges are
generally only available when a property is in the process of being sold but the
discharge is not granted when a taxpayer intends to keep the property. Instructions
on how to apply for a CertiRicate of Discharge from Federal Tax Lien can be found
Subordination will allow other creditors to move ahead the IRS and can help you in
getting a loan or a mortgage. Basically, the federal tax lien can be made secondary to
another lien. However, the IRS can accept or reject subordination of a federal tax lien
at their discretion. Instructions on how to apply for a CertiRicate of Subordination of
Federal Tax Lien can be found here: https://www.irs.gov/pub/irs-pdf/p784.pdf
A withdrawal will remove the public Notice of Federal Tax Lien, but you are still
responsible for the debt. Some of the conditions for withdrawal include entering into
an agreement to satisfy the debt by means of installment payments or if the Riling of
the notice was premature or not in accordance with administrative procedures. The
application for Withdrawal of Filed Form can be found here: https://www.irs.gov/
If tax liens are something you have been dealing with, I encourage you to contact us
at 1-855-532-8453 for a complimentary credit evaluation where our account
executives will thoroughly audit all of the accounts on your credit report, evaluate
your score and recommend the best solution to get you on the track to healthier