How Do You Remove a California State Tax Lien?

Alexandra Tapp
Expert Contributor
Last Updated:
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  • If you have unpaid state taxes in California, the state can issue a tax lien, which is a legal claim to your property to ensure you pay your tax debt.
  • It’s important to have a California state tax lien removed to prevent your credit from suffering, allow you to sell or refinance your property, and ensure that you can get funding in the future.
  • Ways to remove a California state tax lien include playing your entire tax debt plus fees in one lump sum, setting up a monthly payment plan, applying for an offer in compromise, or proving the lien was filed in error.

The state of California takes tax debt seriously. If you live or work in California and fail to pay your state taxes in full and on- time, the local government has several ways to try to get that money from you. One is to issue a state tax lien. Since tax liens can have a detrimental effect on your credit and finances, it’s best to have one removed as soon as possible. Here are your options for doing so.

What Is a State Tax Lien?

If you owe unpaid taxes in California, the state’s Franchise Tax Board can place a lien on your property. This is a legal claim to your property that supersedes the claims of other creditors to ensure that you pay your tax debt. As long as there’s a lien on your property, you cannot sell or refinance it. Meanwhile, your credit rating will take a big hit.

If you’re delinquent on your taxes, the state will send you a number of official notices detailing how much you owe and when you must pay that amount by. If you fail to pay your debt, the Franchise Tax Board can then file a lien on your property through your county’s recorder’s office. This lien lasts until you pay your owed taxes plus any associated interest, penalties, and fees. It will expire if 10 years have passed and the state has not extended the lien. Liens become public record and can show up on your credit report.

The Consequences of a State Tax Lien

A tax lien in the state of California can have serious financial effects. Specifically:

  • You can’t sell or refinance your property.
  • You might not be able to get a mortgage or home equity loan in the future.
  • In the worst case scenario, your house could be seized and sold to pay off your tax debt.
  • Your credit score will drop significantly, impacting your ability to get loans going forward.

It goes without saying that you will want to have a state tax lien removed as soon as possible.

How Do You Remove a California State Tax Lien?

How to Remove a State Tax Lien

You can have a California state tax lien on your property released in one of several ways. We’ll go over each of these options.

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Pay Off Your Entire Debt

Obviously, the fastest way to remove a tax lien is to pay your outstanding state tax debt in full, plus late fees, penalties, and interest. To determine exactly how much you owe, you can either request a copy of your credit report, which will list the lien and its amount, or you can check your balance with the Franchise Tax Board online. Here you will find options to pay via bank account, credit card, check, or money order.

Set Up a Payment Plan

If you’re already in financial distress, putting down a large sum of money all at once can be challenging. Thus, the Franchise Tax Board provides the option of allowing you to pay your state tax debt in monthly installments if you’re eligible. You can qualify for a payment plan if you owe less than $25,000, can pay it off in no more than 60 months, and are up-to-date on your income tax returns. A $34 setup fee applies.

Apply for an Offer in Compromise

Some individuals can qualify for an offer in compromise, in which you pay a lower amount than your total tax debt to clear it. The state only accepts these offers if it legitimately believes the lesser amount is as much money as it will be able to collect from you within a reasonable period. People who qualify must prove they don’t have the financial means or assets to pay their entire tax debt now or in the future.

If you believe you’re eligible, you can apply for an offer in compromise by filing all your tax returns, filling out the appropriate forms, and providing supporting documentation. The Franchise Tax Board will then review your application and determine whether to accept or reject your offer.

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Prove the Lien Was in Error

The Franchise Tax Board must remove a lien if you contact the agency and prove the lien was a mistake. This can occur if the state calculated your tax debt incorrectly and you do not owe that much money. Alternatively, the lien might not have been intended for you, but for a different person entirely. It could also come to light that the lien wasn’t recorded properly, in which case the state must remove it.

If the latter occurs, the Franchise Tax Board must tell the major credit reporting bureaus that it has released the lien. Under normal circumstances, you would be the one to alert the credit companies.

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Regardless of the method used, once you’ve paid or cleared your tax debt, the Franchise Tax Board will notify the appropriate county recorder or California Secretary of State that your lien has been released. It’s good practice, however, to follow up with these offices, as well as with the credit bureaus, to make sure the lien is gone. This will help you get back on the path toward good credit.

If the Franchise Tax Board places a lien on your property, it’s important that you resolve your state tax debt as soon as possible to avoid damaging your credit and financial standing irreparably. Our resources and experts at Solvable can help you get this lien released. Reach out to get started on the path toward being tax-debt-free.

 

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Alexandra Tapp
Expert Contributor
Last Updated: