Getting a Tax Lien off of your Credit Report – Part 1 of 2

One of the most negative items that can appear on your credit report is a tax lien. The reason it’s so bad is because it causes your credit scores to really take a drop. What’s worse is that under Federal tax laws and unpaid tax lien will actually remain on a person’s credit report indefinitely (although usually most credit bureaus remove them after about 10 years).

If you’re suffering the aftereffects of a tax lien on your credit report, there is some good news. You can actually get that tax lien off of your credit report completely and, in most cases relatively quickly. The reason that more people don’t do this is simply because they don’t know about this solution. Let’s take a look at how it works, shall we?

First you need to know what an NFTL is. That’s the code that the IRS uses for a Notice of Federal Tax Lien, lets creditors know that, because of taxes or a tax debt that that you still owe them,  the IRS has an interest in your property. When you can’t pay the taxes on your property the IRS files an NFTL automatically when you owe $10,000 or more in taxes. Once this happens, the major credit reporting agencies pick up this notice and, since they consider tax liens extremely negative, in most cases your credit score will drop precipitously. In fact, tax liens have a similar effect on your credit score than bankruptcy (which is to say, not good).

As of March 2013 it was reported by the Taxpayer Advocate that over 307,000 of these NFTLs have been filed, a drop of 50% over the same time period in 2011, although it’s a number that shows that there are still quite a few people who have been affected by the housing bust.

Between 2011 and 2012 however, something called the “Fresh Start” initiative was implemented by the IRS, something that most homeowners are NOT aware of. It’s a series of policy changes and other procedures meant to help taxpayers who are facing collection from the IRS due to overdue taxes.

One of the changes in the Fresh Start initiative allows certain taxpayers to request a withdrawal of their tax lien even if their actual taxes have yet to be paid in full. Using this new policy a taxpayer can request to have their tax lien withdrawn if their circumstances meet the IRS’ criteria, something we’ll explain in Part 2 of this 2 Part blog.

The good news is that, as reported by the Taxpayer Advocate, nearly 7000 lien withdrawals were issued by the IRS as of March 2013. This is an almost 20% increase over the same time period in 2012 but, unfortunately, is still a far cry from the actual number of people who qualify for the program that either aren’t aware that it exists or don’t know the best way to take advantage  of the new rules.

The best news however is that, when you come back in the next day or two for Part 2, we’re going to show you exactly how to take advantage of the new Fresh Start initiative with specific instructions that you can use to apply for withdrawal of your own tax lien. We’ve seen the positive results that this can have on a credit report and, when you come back for Part two, we’ll show you how to get the same result yourself. See you then.

6 thoughts on “Getting a Tax Lien off of your Credit Report – Part 1 of 2

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