According to the IRS, a tax lien is the government’s way of ensuring primary claim to your property when you do not pay your tax debt. When a tax lien is in place, it automatically becomes public record and credit bureaus prey on this kind of information, causing detrimental effects to your financial future. A tax lien can lower your credit score, making it extremely difficult, if not downright impossible, to apply to finance a car or home. Even something as simple as renting an apartment will have its challenges. And if you’re still not convinced that it will negatively affect you, understand that unpaid tax liens can last for as long as seven years on your credit report.
Fortunately, there is good news.
Depending on if your tax lien is with the federal or state government, you do have options in getting paid tax liens removed from your credit report. In 2011, the federal government introduced the Fresh Start Program, which allows taxpayers to file for removal of their tax lien from their reports after satisfying their debt. To apply for removal of a federal tax lien, follow these steps:
- Obtain the original notice of lien, Form 668(Y), Notice of Federal Tax Lien
- Pay the total amount of your tax debt or satisfy the minimum payments in an automatic payment plan. Shortly after, you will receive IRS Form 668(Z), Release of Federal Tax Lien
- Complete IRS Form 12277, Application for Withdrawal of Filed Form 668(Y)
- Submit the above documents to the IRS with a statement of why you want the lien removed
Unfortunately, the same program does not exist for state liens, even if they have been paid off. You can still request for the lien to be removed from your credit report after paying the debt, but each removal is reviewed on a case by case basis. The process of removal also varies state by state, so you should contact your local state tax office for detailed instructions.
While it can be a lengthy process, the satisfaction of having a clear credit history will outweigh the headaches and rejections you could potentially face for the next seven years with a delinquent credit report. For both federal and state tax liens, the process can be lengthy and confusing. If you are unfamiliar with tax laws, it is imperative to contact a tax professional. Civic Tax Relief specializes in helping individuals in trouble with the IRS. Let us streamline the process and give you the assurance you need. Contact Civic Tax Relief today!