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How to Get a Tax Lien Removed from Your Credit Report

If you fail to pay your taxes in a certain period of time, the IRS will report the issue to the credit bureaus and it will appear as a tax lien on your credit report. Tax liens can significantly lower your credit score and put you in a poor position to obtain credit in the future. If your credit score was already in the low to middle range, you could be setting yourself up for several months or years of rejected credit applications with a tax lien in your credit history. Fortunately, there are some ways to have this removed and clean up your credit report!

Here’s what you need to do to have a tax lien removed from your credit report:

Settle your taxes as quickly as possible. The IRS will accept payments to settle your taxes and even an offer in compromise (OIC) if you can show that you truly are unable to pay your taxes because of your financial situation. Whatever the case may be, seek out the help of an experienced and qualified tax attorney so that they can create a plan to pay off that tax debt as quickly as possible.
Wait for a response from the IRS. Within 30 days of receiving your payment for taxes owed, the IRS will send you a Certificate of Release of Federal Tax Lien read IRS Publication 1450 in the mail. If you don’t get this document in the mail within thirty days, feel free to contact the IRS directly and confirm that they did indeed receive the payment. This document serves as proof that the taxes have been paid and that the tax lien no longer needs to be on your record.
Contact the credit bureaus. You will need to contact the credit bureaus on your own to have the tax lien removed from your credit report. Even though the lien has been paid, the fact that you had the lien on your record in the first place will stay on your credit report for seven years. You do have the right to ask the credit-reporting agencies to remove the lien since you have paid it off in full. You can send them a copy of your Certificate of Release of Federal Tax Lien in the mail as proof. The best way to contact the credit bureaus with this request is to submit a professional letter asking to have the lien removed, and to provide a copy of the IRS certificate.

Restoring your credit after a tax lien on your report can be challenging, so make sure you are making every effort to pay all of your bills on time and are checking your credit report at least once per year for any errors or mistakes that could be hurting you. It is possible to repair your credit after a tax lien has been paid off in full, but it can take time. Take the steps to become more financially responsible so that you can increase your credit score as quickly as possible.

How Will Public Records In My Credit Report Impact My Credit Score?

Author: The Money Coach

Any “Public Records” listing in your Equifax, Experian or TransUnion credit report will seriously lower your credit scores. Although the “Account Summary” section of your credit reports may contain negative information such as late payments or collections, more serious delinquencies will be listed in the “Public Records” area of your credit files.

Public Records In Your Credit Files

In the “Public Records” section of your credit report you will find:

Judgments

A judgment is a court verdict against you, ordering you to pay an outstanding debt. If you get a judgment “Dismissed,” you will almost certainly improve your credit rating, because “Dismissed” court judgments are treated as is they never occurred. Wage attachments or garnishments may also appear as judgments or other forms of public records in your credit files. Also, unpaid child support obligations that are seriously in arrears may also appear on a credit file. Usually, these would be documented when a person was supposed to pay child support via a county or state agency, but failed to do so for at least several months – sometimes for years, ultimately resulting in a court judgment against the individual. Judgments for delinquent child support payments severely tarnish your credit rating and could result in wage garnishments and others actions being taken against you.

Tax Liens

Unpaid taxes owed to local, state or federal authorities may show up on your credit file as tax liens. These typically stay on your Equifax and TransUnion credit files indefinitely, until paid; unpaid tax liens will remain on your Experian report for 15 years. (There is one exception to this. For residents of California, unpaid tax liens remain on their credit reports for only 10 years).

You can expect a tax lien to cause a very large drop in your credit score – and it doesn’t matter whether the amount of taxes owed was $150 or $150,000. A tax lien is a tax lien. So details such as where the court records are held, the case number, and the amount of taxes owed do not impact your credit score. Once paid off or satisfied, tax liens remain on your credit reports for seven years.

Bankruptcies

Although a bankruptcy is a way of you legally discharging your debts, it is also perhaps the single-most negative mark you can have on your credit. Bankruptcies generally remain on your credit report for 10 years. After that time, they should drop off your credit file and have no impact on your credit score. Note that, according to FICO, a bankruptcy that is “Dismissed” does not lower your FICO score. This is because a “Dismissed” bankruptcy basically wipes the slate clean, and is regarded from credit-scoring firms as if the bankruptcy never happened. You will find your bankruptcy status under a reference to its “Disposition.” Check that the “Date Filed” for any bankruptcy is accurate. This matters greatly for your credit rating because the more recent a bankruptcy occurred, the more it will negatively impact your credit rating. Lastly, while other details about a bankruptcy – such as the court involved, the case number, or the type of bankruptcy filing (Chapter 7 or Chapter 13) – do not impact your credit score, you should nevertheless try to ensure that this data is also reported correctly.

Dispute Erroneous Public Records and Boost Your Credit Scores

If you are trying to improve your credit rating, one of the quickest ways to do so is to dispute any information reported about you is that is inaccurate or outdated. If certain “Public Records” information about you can be dismissed or removed, that will go a long way toward enhancing your credit files, and boosting your credit scores.

Can I Lose My Home Because of Overdue Property Taxes?

Author: The Money Coach

Missing mortgage payments isn’t the only way you can lose your home. Falling behind on your property taxes – no matter whether you owe thousands or just a few hundred dollars – also puts you at risk of foreclosure.

In fact, tax lien foreclosures take place every day in America. When you don’t pay property taxes you owe, your city or county has the legal right to put a high-priority tax lien on your property in the amount of the past due taxes, plus interest and penalties.

After a set period of time – typically anywhere from six months to two years, depending on where you live – if your taxes are still unpaid the taxing authority’s tax lien gives them the right to foreclose on your property. Your home then gets sold at an auction to anyone willing to pay off the back taxes due. Lots of investors buy “tax lien certificates” in the hopes of getting a home in tax foreclosure. For these investors, it’s a way for them to purchase a home at a fraction of its value – without even having to pay off the mortgage due on the house.

Property Tax Delinquency Can Lead to Foreclosure

The number one reason people become delinquent on their property taxes is because these taxes can run into the thousands, driving up the cost of homeownership considerably. Some lenders want you to add your property taxes into the monthly mortgage payment you make – to be sure those payments get paid on time. So if the principal and interest on your mortgage totals $2,000 per month and your annual property tax bill is $2,400, that’s an additional $200 a month tacked onto your payment.

Check out the taxes paid in the following 9 states, which have the highest property taxes in the country. You’ll notice that the top five states with the biggest tax bills are all located in the Northeast. However, even Midwest states, such as Illinois, and Western states, like California, make the list.

State / Median Property Tax

1. New Jersey $5,352

2. New Hampshire $3,920

3. Connecticut $3,865

4. New York $,3076

5. Massachusetts $2,974

6. Illinois $2,904

7. Vermont $2,835

8. Wisconsin $2,777

9. California $2,278

Source: Census Bureau, Tax Foundation
Fortunately, even if you live in a community with high property taxes, there are some smart ways to go about lessening your tax burden – and subsequently keeping your home.

Ask The Money Coach

Posts Tagged ‘tax lien’

How to Get a Tax Lien Removed from Your Credit Report

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How Will Public Records In My Credit Report Impact My Credit Score?

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Can I Lose My Home Because of Overdue Property Taxes?

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