How Long Does a Federal Tax Lien Stay on Your Credit?

By Top Tax Staff | May 17, 2017 7:00:00 AM | IRS Collections, Tax Liens

    

irs-lien-on-home

Federal liens are just like any other form of defaulted financial obligation in the damage they can do to your credit rating. Unlike unpaid medical bills, credit cards, car loans, and other expenses, IRS collection efforts can vary in how long they are reported by the government and stay on your record. You can take the necessary precautions now to protect your rating and record by discovering the full impact that comes with an IRS tax lien.

Unpaid Federal Tax Liens

Unpaid federal tax liens can in theory remain on your credit report forever. When the IRS cannot collect its debt from placing a lien on your bank account or other assets, it can by law continue to report and maintain this negative information on your report for as long as it wishes.

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However, many times the federal government will stop reporting your unpaid tax lien after a certain length of time has passed. Many people see this information drop from their records after seven to 15 years.

Paid Tax Liens

If the IRS can collect its money by placing a lien on your assets, it can still report this information on your record for up to seven years. Even if the debt is paid in full, the lien may still show up when you check your credit for seven years from the date that you satisfied it.

Federal Tax Lien Withdrawal

You may be able to remove the negative information from your credit report before the seven to 15 year limit by making a formal request to the IRS. To make this official request, you must fill out and submit IRS Form 12277.

For your form to be considered and approved, you must meet several important criteria in regards to your tax debt. These criteria include:

  • ensuring that the lien is paid in full
  • filing returns and paying taxes for the last three years
  • being up-to-date on all current estimated tax payments and federal tax deposits
  • making or satisfying an Offer in Compromise (OIC) to pay the debt in full
If you cannot meet all or any of these stipulations, you still might be able to halt collection efforts against you by entering into an installment agreement with the IRS. The agreement will likewise stop the government from placing a lien on your assets. You may qualify for this debt repayment plan if:

  • you owe less than $25,000 in back taxes
  • the debt can be paid off in 60 months or sooner
  • you are current on filing and paying taxes for the last three years
  • you have made three on-time payments on your current tax debt
  • you have not previously defaulted on an IRS installment agreement
To request an installment agreement, you must complete and submit IRS Form 9465. You can also agree to automatic bank withdrawals of your monthly payments by using this form.

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Professional Tax Assistance

If you are unsure of how to engage the IRS regarding your federal tax lien, you can get the experienced and empathetic help you need by retaining a tax professional. A tax pro knows the laws regarding what the IRS can and cannot do when collecting money from you.

A tax professional can tell you more about the best options to settle your debt. This individual can also complete and submit important IRS forms on your behalf.

The Fair Credit Reporting Act allows the IRS to include both unpaid and paid tax liens on your credit report. You can ask for a withdrawal or work out an installment agreement to protect your rating and have negative information removed from your file.

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