How Long Does an Uncollectible Tax Lien Stay on Your Credit?

Convincing the Internal Revenue Service that it cannot collect on a bill is a huge victory, because the IRS can pursue a debt forever, but this victory may be short-lived as a tax lien can affect your credit for years. Thus you may need to pay off a tax lien to obtain credit even if the IRS stops pursuit of the debt. A new law in 2011 makes paying off tax liens even more enviable for consumers that in years past.

Uncollectible Tax Lien

Sometimes, the IRS declares a tax lien noncollectable when the agency believes paying the tax would constitute a hardship, such as when the taxpayer is disabled, or the statute of limitations passes on the debt. However, the status of "noncollectable" does not affect the federal credit history reporting time limit for a tax lien, according to Tucson, Arizona attorney Arthur Weiss.

Tax Lien and Credit Report

Paid tax liens only remain on your credit history for seven years after you pay off the bill. The Fair Credit Reporting Act lets the national credit bureaus report an unpaid tax lien forever, but one of the bureaus -- Experian -- only reports unpaid tax liens for 15 years. If you are a resident of California, an unpaid tax lien can only stay on a report for 10 years.

Tip

In February 2011, the IRS changed its policy on withdrawing tax liens. If the taxpayer pays off his unpaid taxes, the agency removes the tax lien from its records and the credit bureaus can no longer report it. The new rule also applies to tax liens imposed before the rule change. You want to remove a tax lien from your credit history, because a lien can take 200 points off of your FICO credit score, according to Smart Credit.

Prevention

Ideally you should pay off the entire tax bill, but the IRS sometimes accepts partial payment, or an "Offer in Compromise." If you need the tax lien removed immediately, you must offer the IRS a lump sum cash payment. Installment agreements may stop aggressive collection tactics, such as garnishing your bank account, but as long as you owe money to the IRS the lien stays on record.