How to Get a Tax Lien Removed From Your Credit Report

A tax lien represents a legal claim the government places on a taxpayer’s property due to unpaid tax debts. This claim secures the government’s interest in assets like real estate, vehicles, and financial accounts. Tax liens can impact an individual’s financial standing, making it difficult to secure loans, mortgages, or sell property. Addressing a tax lien promptly is important for credit health.

Understanding Tax Liens and Your Credit Report

A tax lien originates when a tax authority asserts a claim against a taxpayer’s property for overdue taxes. The IRS may then file a Notice of Federal Tax Lien (NFTL) to publicly announce this claim, which can attach to a taxpayer’s current and future assets.

As of April 2018, the three major credit bureaus—Experian, Equifax, and TransUnion—removed all tax liens from consumer credit reports. However, tax liens remain public records, accessible by lenders when evaluating financial risk. While a tax lien might not directly impact your credit score, its public record status can still influence lending decisions and financial opportunities.

Satisfying the Tax Lien

Resolving the underlying tax debt is the primary step toward addressing a tax lien. This involves paying the full tax debt, including penalties and interest. To determine the exact amount owed, taxpayers can contact the IRS Centralized Lien Operation or submit a written request.

Various payment options exist to satisfy a federal tax lien. A lump sum payment is the most direct method, leading to the lien’s release typically within 30 days of payment. If a full payment is not immediately feasible, taxpayers may explore an installment agreement, which allows for monthly payments over an extended period. Another option is an Offer in Compromise (OIC), where the IRS may agree to settle the tax debt for a lower amount if the taxpayer demonstrates an inability to pay the full amount due to financial hardship.

Once the tax debt is paid in full, the tax authority issues a release of the lien. The IRS issues a Certificate of Release of Federal Tax Lien for federal liens. A release confirms the debt is satisfied and the government’s claim removed. However, a release does not erase the public record of the lien; it simply indicates the debt has been paid.

Requesting Lien Withdrawal

A lien withdrawal is distinct from a lien release, offering a more complete removal of the tax lien from public records. While a release indicates the debt is paid, a withdrawal effectively treats the public notice of the lien as if it never existed. This is important because even though federal tax liens no longer appear on credit reports, their public record status can still be visible to potential creditors.

For federal tax liens, taxpayers can request a withdrawal using IRS Form 12277. The IRS may grant a withdrawal under specific circumstances. One reason is if the tax liability has been satisfied and the lien released, provided the taxpayer has been compliant with tax filings for the past three years and is current on estimated tax payments or federal tax deposits.

Withdrawal may also be possible if the taxpayer has entered into a Direct Debit Installment Agreement (DDIA). If the amount owed is $25,000 or less (or paid down to that amount), and the DDIA fully pays the debt within 60 months, the IRS may grant a withdrawal after three consecutive direct debit payments. Other criteria include situations where the NFTL was filed prematurely or not in accordance with IRS procedures, or if withdrawal facilitates collection or is in the best interest of both parties.

When completing Form 12277, include identifying information, details of the lien, and documentation supporting the reason for the request. Submit the form to the IRS office handling the case.

State and local tax liens have their own specific withdrawal or expungement processes, which vary by jurisdiction. Taxpayers with state or local tax liens should contact their relevant state or local tax agency to inquire about their specific procedures and forms for lien withdrawal.

Notifying Credit Reporting Agencies

Even after a tax authority issues a release or withdrawal of a tax lien, the information may not automatically update on credit reports. If a tax lien remains on a credit report, it should be disputed.

To initiate a dispute, taxpayers should gather documentation, such as a copy of the IRS Form 668(Z) or the withdrawal letter from the tax authority. This evidence confirms the lien has been resolved or withdrawn.

Disputes can be filed online through each credit bureau’s dispute portal, by mail, or by phone. When disputing, clearly state the tax lien should not be on the report due to its release or withdrawal. Providing clear evidence with the dispute is important. The credit bureaus are required to investigate the dispute, which may take up to 30 to 45 days, and correct any inaccuracies.

Confirming Removal

After notifying the credit reporting agencies, verify the tax lien has been removed from all credit reports. Obtain copies from the major bureaus. This can be done for free once every 12 months from each bureau through AnnualCreditReport.com.

Wait approximately 30 to 45 days after submitting the dispute before checking the reports to allow sufficient time for processing. Carefully review each report to ensure the tax lien entry is no longer present. If the lien still appears, follow up by re-disputing the item with the credit bureau, providing any additional information or clarification requested. If necessary, contact the tax authority again to confirm the status of the release or withdrawal and request further assistance.