Q&A Video: How Do I Remove a Tax Lien From My Credit Report?

John Ulzheimer

John Ulzheimer | Q&A Videos

Jan 12, 2016

Are you looking to remove a tax lien from your credit report?

Learn the steps you can take today to remove a tax lien from your credit report from our credit expert, John Ulzheimer.

Transcript

Hi. My name is John Ulzheimer, and I’m a credit expert who contributes to CreditCardInsider.com If you have any questions for us, please leave them in the comments section below. Today’s question is this…

How do I get a tax lien removed from my credit report?

And I’m going to address the 2 types of tax liens. There are federal tax liens, and then there are state tax liens. Different negative items can remain on credit reports for different periods of time. And a tax lien is very atypical, meaning that it does not fit into the same category as other types of derogatory entries.

Most bad stuff has to be removed sometime between 7 and 10 years after its been placed. That does not apply with unpaid tax liens. Unpaid tax liens actually have no requirement for removal. If you go through the Fair Credit Reporting Act which is the federal statute that defines how long derogatory information can remain on a credit report, it’s actually silent on federal tax liens, meaning it doesn’t require the credit bureaus to remove them as long as they’re unpaid.

The credit reporting agencies can certainly implement policies and choose to remove them eventually. But there’s no requirement for them to do so if they are in fact unpaid. So tax liens actually have a variety of different statuses. You can have an unpaid lien, which means the lien is enforced. That can stay on indefinitely.

And then you have what’s referred to as a paid or released tax lien. And that essentially means you made a deal with the taxing authority, whether that’s the IRS or your state tax authority. And you’ve made a deal with them to either pay the lean or settle the lean. And they have filed it as being released, which means the lien is no longer in force. Removal of a released tax lien occurs 7 years from the date released. And so this is important that you understand how this works.

If you have a tax lien that sits on your credit report for 3 or 4 years, and then you go pay it, and then they release it then. Thats when the 7 year period begins, not when the lien was originally filed. The last status of a lien, which is really important, because this is where you want the lien to be, is withdrawn.

A withdrawn tax lien will be removed from your credit reports immediately. There’s no requirement for the credit bureaus to do so. But they all have policies where they are choosing to remove withdrawn tax liens.

So the question is really not necessarily, “How do I get a tax lien removed from my credit report”? But more importantly, “How do I get my tax lien to be withdrawn”?

It’s very difficult to get a tax lien withdrawn if it is a state tax lien. Most of the time if you pay, they’ll simply show it as being released. At the federal level the IRS implemented a program called the Fresh Start Policy, several years ago, it’s not anything new. And what they’ll do is, if you will pay them in full what you owe them, or enter into a payment plan, which will eventually lead to them being paid in full, you can actually petition and request that they withdraw the tax lien.

And that’s very important because if you’re able to get them to do that, if you’re successful with your petition, then you all you need to do is contact the credit reporting agencies and let them know, “Hey look… this tax lien has been withdrawn, please remove it from my credit report.”

What they’ll probably do, the credit bureaus, is they will go to the courthouse, and they will ensure that a withdrawal of lien has in fact been filed. Or you can certainly get a copy of it yourself, and then provide it to the credit reporting agencies proactively. And kinda cut out that step and save some time.

If you are successful in getting it removed from a crime report, then bravo, because it will cease to have any effect on your credit at that point. Items not on your credit report have no influence on your credit scores.

And so if that was the only item that was on your credit report that was negative or derogatory in any way, once it has been removed, it’s very likely that your score is going to go up. And it could go up considerably. So keep that in mind when you’re dealing with these taxing authorities that will “released” is not the magic word, “withdrawn” is the magic word.

For a more in depth look at removing a tax lien from your credit report, check out this post »

If you have any other questions regarding financial topics or credit, please submit them to CreditCardInsider.com or in the comments section below. Thanks for watching! Have a nice day!

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