Tax liens can have a devastating impact on your life. They are reported to the credit bureaus and block you from obtaining credit and selling your home. Tax liens may even prevent you from obtaining gainful employment. Adding insult to injury, they may remain on your credit report indefinitely. So what are your options to remove them off your credit report?
The 2 ways to remove a tax lien from you credit include:
- Have the IRS withdraw the lien
- Pay off the lien and wait 7 years for the credit bureaus to stop reporting it
Before we go further, we need to go over a couple of things on “Lien Status”.
To understand how to remove a lien from your credit report, we must first get familiar with 3 lien statuses. They include:
- No status – meaning there is a lien on you and the credit bureaus will report it
- Paid or Released – indicating the lien is no longer on you and the credit bureaus will report it
- Withdrawn – this isn’t exactly a status shown on your credit report. In this case, the lien will not be reported by the credit bureaus (in theory only),
“No status” and “Paid or Released” lien statuses are the two that will remain on your credit report and in some circumstances, indefinitely. A “Withdrawn” status, isn’t really a status at all. When a lien is withdrawn, it should remove any evidence of a lien from your credit report.
Removing A Tax Lien From Your Credit Report
Credit bureaus are required by law to remove most negative items on your credit, like a bankruptcy, after 7 years. However, in tax lien cases, those laws do not apply. They may remain on your credit report past the 7 year mark or indefinitely.
Removing a “No Status” Lien
A way to remove this lien from your credit report is, to get it withdrawn. If your taxes were filed incorrectly and you didn’t have a tax debt to being with, you can amend your tax return. Consequently, the IRS will withdraw the tax lien from your credit report. Sometimes liens are filed by mistake, which may also be withdrawn by contacting the IRS.
I highly recommend getting back tax professional to take look at the tax return in question, to see if they can lower tax debt to zero or less. You might even find out the IRS owes you, and would provide the opportunity to increase your credit score. (Ask A PRO)
Removing a “Paid or Released” Lien
This lien status in many cases cannot be removed. They will stay on your credit report 7 years past the date the lien was paid or, released. In this circumstance, you want to make sure you note your calendar to review your credit report after the 7 years is up. Also, it wouldn’t hurt to try to dispute the lien sooner, if by chance the credit bureaus decide to remove it sooner.
Removing “Withdrawn” Lien
As discussed earlier, if a lien is withdrawn, it should not be reflected on your credit report. If, the credit bureaus are still reporting it on your credit, you may dispute it online or with a letter. I would probably send a copy of any notices proving the release if you send your dispute by mail.
As always, if you have any questions or comments. Please feel free to leave them below. I will always try and find the best answers possibly for you back tax issues.