An IRS tax lien can prevent a consumer from getting the financing and credit they need, and it can also mean that the IRS has access to your personal property. A tax lien may sound intimidating, but it is a simple legal process. As long as a consumer understands what a lien is and how to properly address it, then it can be removed from a credit report eventually.
Identification
A tax lien is the way that the IRS can use to collect back taxes that are due. When the IRS files a tax lien, they are able to have an influence over every aspect of your financial life including the ability to secure financing for large purchases such as a house or a car, or the ability to get more credit. Once the IRS is able to put a tax lien on your personal accounts, they can then use that lien to collect the back taxes that you owe.
Significance
The IRS can use a tax lien to seize your personal property to satisfy the back taxes owed. When a tax lien is authorized, the IRS does not need any further authorization to take any personal property that you own to satisfy a tax debt.
Time Frame
A tax lien remains on a credit report, and affects a credit score and the ability to apply for new forms of credit, for 15 years if it is not paid. A tax lien that is paid will remain on a credit report for 7 years after it has been paid. This 7-year period can cause the tax lien to remain on a credit report for more than the original 15 years, or less, depending on when it was paid. A tax lien that is paid after being on a credit report for 2 years will be on the credit report for a total of 9 years. A tax lien that is paid after being on a credit report for 12 years will remain on that report for a total of 19 years.
Considerations
The IRS has 30 days from the date of payment to release a tax lien. However, the IRS can sometimes let this time period lapse without performing the release, and it is the responsibility of the tax payer to follow up and make sure the task is done properly. The IRS offers a toll-free phone number where tax payers that are expecting line releases can call to confirm a lien has been released, or request that a lien that was supposed to be released be investigated.
Expert Insight
According to Credit.com, it is a good idea to obtain a copy of the lien release from the courthouse it was filed in and send a copy to each of the three credit reporting agencies. While the agencies will eventually pick up on the lien release in their normal course of research, it is a good idea to accelerate the process by providing copies of the lien release for the agencies to use in their records. The sooner a lien is off of a credit report, the sooner that consumer can get new credit or financing.
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