Ananlyze the Impact of Your Tax Lien On Your Credit Report

A major change in the tax laws was made in 2011 regarding tax lien. This item that appears in a credit report and can majorly damage it remains there for seven years. It is a very negative item and there have always been IRS tax lien withdrawal does not extend to state tax liens.queries about how it can be removed. Till this change was implemented, the removal of a tax lien was considered to be illegal. However, with the new rule in place, you can get it removed legally, with the IRS’s blessings. This will see a market improvement in your credit report and a significant rise in your credit score.

By How Much Will The Removal Of Tax Lien Increase The Credit Score?

Despite the fact that FICO, the major credit-scoring agency has shared a lot of its score calculating secrets with the consumers, the process of calculation of credit scores in relation to each of the items is still unknown. The score also depends upon what other negative items are there in the credit report. However, getting a tax line removed from the report would help your score a great deal.

Procedure To Get Tax Lien Removed

The IRS, in its IRS Fresh Start plan, announced that people who have paid their taxes or have satisfied tax debts can apply to the IRS to get the lien removed. The process is long and tedious and takes time but with a little perseverance, it bears fruits. Given below are the steps that must be taken for lien-free report.

The notice of withdrawal will be filed at the same office where the lien was recorded.

After paying the tax debt in full, you must request the IRS to withdraw the lien by applying in Form 12277. This form is know as “Application For Withdrawal Of Filed Form 668(y), Notice of Federal Tax Lien.
The IRS will respond to your request in Form 10916(c) i.e. Withdrawal of Filed Notice OF Federal Tax Lien.
You can then dispute the tax lien with the credit bureaus by providing the bureaus with a copy of this form.
The agencies will then confirm the withdrawal and delete the tax lien.

If you wish for the copy of the withdrawal to be sent to various parties, you will have to provide names and contact addresses of the parties and request the IRS to send them a copy too. This law extends only to tax debts settled in full and not to any tax settlements where tax paid is less than what you owe.

The process seems simple enough but is time consuming owing to the fact that that law is new and the routing of application through the legal channels is a lengthy process.

The law is applicable retroactively and consumers who have paid off their taxes completely in the past i.e. prior to the implementation of the law but still have the lien in their credit report due to the statute of limitations can apply for the withdrawal.

Why Does IRS Place Tax Liens In Credit Report?

Contrary to common perception, it is not the IRS that places the lien in credit report. The credit bureaus send their representatives to the courthouses to gather such records. These liens, as they are an individual’s financial data, affect the lender’s decision to approve a loan or not. They tell about a client’s credit worthiness.

Conclusion

This new rule is beneficial to both the IRS and the consumers as the IRS gets its taxes in full and the consumers, who in the past attempted to settle taxes will now try and pay them in full because of the major positive effect that the removal has on the credit report and the scores.