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.