What is a Tax Lien?
A tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. The IRS/ State/ County files a public document, the Notice of Tax Lien, to alert creditors that the government has a legal right to your property.
How a Tax Lien Affects Your Credit
Tax liens appear on your credit report under public records and have a very negative impact on credit scores. According to TransUnion, under federal law, city, county, state and federal tax liens can appear on your report indefinitely. According to Experian, unpaid tax liens can stay in your credit history for 15 years – longer than any other derogatory account – so it is important to pay Uncle Sam.
Paid tax liens will remain on your credit report 7 years from the date they are paid. That means credit scores will improve, but not right away and not by much. As the paid tax lien gets older, its negative impact on the credit score will gradually decrease.
How a Tax Lien Affects You
- Credit — Once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit.
- Assets — The tax lien attaches itself to all of your assets (such as property, securities, etc…) and to future assets acquired during the duration of the lien.
- Business — The tax lien attaches itself to all business property and to all of the business assets including accounts receivable.
- Bankruptcy — If you file for bankruptcy, your tax debt, tax liens, and Notice of Federal Tax Liens may not be discharged under the bankruptcy.
How to Get Rid of a Lien
Paying your tax debt – in full – is the best way to get rid of a federal tax lien. The IRS usually releases your lien within 30 days after you have paid your tax debt.
How to Avoid a Lien
You can avoid a federal tax lien by simply filing and paying all your taxes in full and on time. If you can’t file or pay on time, don’t ignore the letters or correspondence you get from the IRS. If you can’t pay the full amount you owe, payment options are available to help you settle your tax debt over time.
The Tax Lien Solution
Credit Firm has helped thousands of clients delete Tax Liens from credit reports after they had been paid. If you have a Tax Lien reporting on your credit history, contact Credit Firm and Sign Up today to fix your credit report and raise your credit score.