Can I Get an IRS Debt off of My Credit Report if It Is Older Than Ten Years?

Like all debt, IRS bills eventually become noncollectable, but not paying your tax debt could haunt you for the rest of your life and cost much more than what you owe the federal government. Most bad items eventually leave your credit report, but you can probably never wait out federal tax debt.

Identification

The Internal Revenue Service does not report delinquent tax debts to the credit bureaus, because it is an unnecessary step. It has a more powerful weapon: tax liens and levies. When you do not pay taxes, the IRS puts a public claim on any of your property and the credit bureaus find out about it. The credit bureaus can report the lien indefinitely and TransUnion and Equifax do, but Experian only reports tax liens for 15 years. Some states further restrict reporting tax liens, such as California, which limits the time to 10 years. Unless you live California, you cannot remove an IRS tax lien after 10 years.

Considerations

Once you pay your tax debt, the IRS issues a Release of the Notice of Federal Tax Lien and the bureaus report the lien for seven years. If 10 years pass, you should dispute the lien with the credit agencies---ideally sooner because of the seven-year rule. The bureaus could remove an unpaid tax lien after 10 years if the IRS does not respond to a dispute. This might happen should the IRS deem the account noncollectable and not waste taxpayer resources responding to a credit agency.

Exception

A removal of a federal tax lien does not totally put you in the clear. The credit bureaus can ignore time limits on reporting IRS tax liens when you apply for more than $150,000 in credit or life insurance and a job paying more than $75,000 per year, according to the Federal Trade Commission.

Tip

Future lenders will probably pull your report from all three agencies, so creditors usually find out about an unpaid tax lien. Tax liens put a huge drag on scores. Thus, you should pay them off immediately and wait the seven years. The tax lien should have a minimal effect sooner than seven years, because negative items become less important over time. You can try to bargain with the IRS for a settled bill, called an Offer in Compromise. These, however, rarely work, because IRS debts are secured by the lien and thus usually not included in a bankruptcy discharge.