How to Remove a Tax Lien Notice From Your Credit Report

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Shannon McKee
Shannon McKee
January 10, 2019

  • An IRS tax lien notice can be removed from your credit report before the full seven years has elapsed.
  • Your IRS tax lien notice is eligible for removal if there was a mistake on the paperwork, you are working on your payments, or you can prove that having it removed will make it easier for you to pay them the money back.
  • There is a set process in place that you can follow to have your tax lien notice removed from your credit report.

 

When you finally pay off an outstanding debt, that debt should be removed from your credit report, right? You made the payment, and it’s no longer something you owe, but the negative debt remains on your credit report for a full seven years. The good news is that while you’re unable to remove all of the negative marks from your credit report, the IRS has made it possible to remove an IRS tax lien notice.

Tax Lien and Tax Lien Notice: The Basics

Understanding these terms can help you when you find yourself presented with paperwork for your tax debt. When you owe back taxes to your local community, either agents of the state department of taxation or the IRS will pursue collecting the money that you owe.

How to Remove a Tax Lien Notice From Your Credit Report

The IRS or another governmental agency can create a tax lien against you. This lien is a claim on your property in that these agencies can take your possessions to get your back taxes paid to them. The lien in itself is not added to your credit report right away, however. The IRS has to publish a lien notice.

A tax lien notice essentially states that the IRS has a claim on your property and lets other creditors know that the IRS has a priority on securing your property over their claims. The IRS will file the tax lien notice through a local register office to make it public. You can have up to 15 different tax debts listed on a tax lien notice.

Tax Lien Notice Repercussions

A tax lien notice on your credit report has serious ramifications. One of the first issues is that it can reduce your credit score by up to 100 points. This reduction could make it more difficult for you to get new credit cards, a loan for a house or car, and other financial instruments.

Additionally, a tax lien could prevent you from getting a new job. If you work in a career involving money, a tax lien notice could prevent you from getting the job you want. Also, if you’re seeking a career where a professional license is necessary, such as becoming a real estate agent, you’ll be disqualified from eligibility if a tax lien appears on your credit report. As you can imagine, the repercussions of a tax lien notice are something to take seriously.

Situations Where the Tax Lien Notice Can Be Removed

The IRS won’t remove a tax lien notice from your credit report in every case. Some of the potential situations that will allow you to file for your lien to be removed include the following:

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  • The IRS made a mistake on your paperwork to get the tax lien.
  • You’ve cooperated with the IRS by creating an installment agreement, and you have been making your payments on time.
  • You’ve notified the IRS that you’ll have an easier time making payments if the lien is removed, such as when you’re seeking a higher paying job.
  • Lastly, you can request the tax lien to be removed when it’s beneficial for both you and the IRS, such as once you’ve paid the tax debt in full.

Steps for Removing the Tax Lien Notice

  1. Check your credit report. You will want to make sure that the tax lien notice is noted on your credit report before you go through the process of having it removed. You can get your credit report for free through the three major credit bureaus thanks to the Fair Credit Reporting Act.
  2. Once you’ve verified that the tax lien is indeed on your credit report, you’ll want to complete IRS Form 12277. It can be helpful to have the original Form 668(Y) that the IRS sent you to inform you about your tax lien initially. This form will give you some of the information you need for your Form 12277, and you can include it with your filing of the new form. You’ll need to identify yourself on it, identify the tax lien you want to remove either through the Form 668(Y) or as much information you can remember on it, and give a reason why this lien should be withdrawn.
  3. Not only do you need to provide IRS Form 12277 and Form 668(Y), but you also need to include a letter. This letter has to state that you permit the IRS to share this information with the credit reporting agency, creditors, or financial institutions. This letter essentially authorizes the IRS to give out this information. Not providing this letter means that the IRS cannot share this information, and the tax lien notice will remain on your report. You’ll need to include the name and address of each party you want to be notified, and in this case, those parties should be Equifax, Experian, and TransUnion.
  4. Mail the completed form and additional information to the local advisory group manager.
  5. The IRS will take about 30 to 45 days to make its decision and inform a courthouse in your area where the agency filed the notice initially. You’ll also receive a copy of this information for your records.
  6. You may find that the IRS didn’t inform the credit bureaus of the removal of your tax lien notice. Once you get the information back from the IRS that it is withdrawing your tax lien, you then send this information to the different credit bureaus to have them remove it from your report. This step means you have to dispute the lien on your credit report. In some cases, you may have to challenge it more than once if the credit bureaus don’t remove it in a timely manner.

Have you been dealing with tax debt and don’t know where you should turn? Get assistance with Solvable. We can help you find the right path forward in your debt. Getting your tax debt paid off and removing the tax lien notice from your credit report are often the first steps to take. Our articles and information on finding debt relief can give you the knowledge to help you make the best decisions.

 

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