How to Remove Tax Liens From Your Credit Report
A lot of people think they’ll never get a tax lien removed from their credit history.
This couldn’t be further from the truth. In fact, removing a tax debt will be easier than removing a private debt like a credit card charge-off or medical bill.
Back in 2018 the three credit bureaus stopped reporting local, state, and federal tax liens and civil judgments.
So if you still have a lien pulling down your credit score, a few phone calls or letters could solve the problem.
Removing a Tax Lien from Your Credit History in 3 Easy Steps
The Consumer Financial Protection Bureau lobbied Experian, Equifax, and Transunion to stop including tax liens in their credit reporting because this information was so often inaccurate.
The National Consumer Assistance Plan (NCAP) was also instrumental in fighting for this change.
The credit reporting agencies agreed. After all, accuracy is important to stay in compliance with the Fair Credit Reporting Act. And the agencies were spending a lot of staff time correcting old data from tax liens.
So they took action in April of 2018, agreeing to stop listing unpaid tax liens and civil judgments on consumer credit reports.
So if your credit file still includes a federal, state, or local tax debt, you can get the derogatory marks removed by:
- Contact TransUnion
- Contact Equifax
- Contact Experian
1. Contacting TransUnion
If the tax lien appears on your TransUnion report, call the bureau from 8 am to 11 pm weekdays at 833-395-6941.
For best results, write a letter disputing the tax lien.
Write To TransUnion At:
- TransUnion Consumer Solutions
P.O. Box 2000
Chester, PA 19016-2000
2. Contacting Equifax
If Equifax is the source of your public debt listing, you can call the bureau between 8 am and midnight Eastern time seven days a week at 866-349-5191.
Of course, we always recommend writing to Equifax so you’ll have a paper trail.
Write To Equifax At:
- Equifax Information Services LLC
P.O. Box 740256
Atlanta, GA 30374-0256
3. Contacting Experian
Experian’s line for disputing old charges is 866-200-6020. Call between 9 am and 5 pm Monday through Friday or 11 am to 8 pm on weekends.
Write To Experian At:
- Experian Dispute Department
P.O. Box 4500
Allen, TX 75013
Information You’ll Need to Remove Tax Lien
To make your phone call or letter most efficient, be sure you have your Social Security number available. If possible, include the account number for the tax debt.
Also, if you call, be prepared to confirm your personal information such as old addresses and old or current credit account information.
If you’re not sure which bureau is reporting a public debt on your credit file, visit annualcreditreport.com to request your free credit report.
Each year, each credit bureau must provide you with one free credit report if you request it.
Get Your Free Credit Report
Follow Up to Confirm the Removal
After you’ve made your request, wait a month and then check your credit again.
If you’ve already gotten your free annual report at annualcreditreport.com you can pay for another report. Or you can check your FICO score with an existing creditor or by signing up for a free service like Credit Sesame.
If the negative item is gone, pat yourself on the back for a job well done. If not, write another letter and call the offending credit bureau to ask why.
Can Unpaid Liens Still Hurt My Credit Score?
The three major credit bureaus want to report accurate information. In fact, the Fair Credit Reporting Act of 1990 requires them to report your score as accurately as possible.
But big policy changes like discontinuing public debt reporting don’t always go into effect smoothly. If a tax lien still lingers in your credit file, the bureaus will not automatically remove it without you first disputing the item.
You may not learn about the problem until you apply for a mortgage, a car loan, a student loan, or any other kind of borrowing. With tax debt still pulling down your credit score, you’ll be a lot less likely to get the loan. If you do get approved, you’ll pay much higher interest rates.
So be sure to get the lien withdrawn from your file before you apply for a loan if possible. The lender won’t necessarily notice your FICO score was diminished by a tax lien or a civil judgment. Instead, the loan officer may see a low number and not dig any deeper into the reason.
Other Ways Tax Liens Can Harm Your Personal Finance Life
Even though credit bureaus have stopped reporting tax debt to your potential creditors, an unpaid tax bill or tax lien can still wreak havoc on your financial life.
Worst case scenario, the government could garnish your wages or repossess your personal property until the tax debt is resolved.
With a legal claim on your home or car you couldn’t sell the property until the tax was paid. Talk about frustration!
To avoid this kind of scenario, always:
- File your state and federal income tax returns on time: Even if you don’t owe money, file your taxes just in case.
- If you’re self-employed, pay your estimated tax on time as laid out in your installment agreement: Getting behind on taxes has killed a bunch of promising businesses and side hustles. Making your federal tax deposits on time throughout the year can prevent a ton of trouble later.
- Save for your property taxes: Your real estate tax could cost thousands of dollars a year. Save money throughout the year, either on your own or through your mortgage company’s escrow service.
- Set up a payment plan: Despite its harsh reputation, the IRS will work with you in most cases. They do want their money. If you owe less than $25,000 you could set up a direct debit installment agreement to make payment less painful. Many state departments of revenue also show flexibility with payment plans and ways to lower interest rates on unpaid taxes. Don’t wait until it’s too late to take advantage of these relief programs!
When It’s Time to Call in the Pros
If you’d rather not deal with the credit reporting agencies directly, you could always hire a pro to do the legwork for you.
Credit repair companies like Credit Saint and Lexington Law Firm excel at correcting outdated and inaccurate data from your credit file.
They’ll write letters, follow up, and confirm the removal of your tax liabilities from your credit history for you.
In exchange, you’ll pay them a monthly payment for as long as you need the service. In the case of tax debt post-2018, a credit repair company could fix the problem in two or three months.
If you’d rather your bank account not take this hit of a few hundred dollars, you can take care of this yourself. But time is money — and vice versa — so if you’re the type of person who likes to call in the pros, just know that help is available.
For tax debt or civil judgments, I suggest you check out Lexington Law Credit Repair. They’ll take care of you. This credit repair agency is staffed by actual attorneys and paralegals. Tax law is their native language.
Check out Lexington Law
Will the Credit Bureaus Start Back Reporting Tax Liens?
We have no reason to believe the major credit bureaus will resume reporting tax debt any time soon.
But the bureaus do respond to pressure from their customers — the nation’s lenders — so no one can say for sure whether the bureaus will ever resume their pre-2018 policies of reporting income tax debt, unpaid local tax payments, or real estate tax delinquencies, and civil judgments.
So just in case, we’re leaving the following information in this post. For now, these steps won’t be necessary, but before April of 2018 this was your best strategy:
Step 1. Using The Fresh Start Program
Back in 2011, the IRS created “The Fresh Start Program.” The idea is very simple. It allows people to get tax liens removed from their credit report, under certain circumstances, even if the debt hasn’t been paid in full.
In order to take advantage of this program, you’ll first need to file a form with the IRS. This form is called Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien. You can download it here.
While you’re filling out this form, it’s very important that you write “Fresh Start Program” when you get to question 12.
Step 2. Filing IRS Form 12277
Once you have filled out the 12277 form, you’ll need to send it Certified Mail to the IRS. If you’re unsure exactly which IRS office to mail it to, you can look that up on the IRS’s Numbers and Addresses page. I just want to say again, make sure you send it certified mail.
Step 3. Disputing the Tax Lien with the Credit Bureaus
You should get a response from the IRS within about 30 to 45 days notifying you of whether you were approved for the Fresh Start Program. If you were approved, and hopefully you were, you’ll next need to dispute the tax lien with the three credit bureaus.
The way this will work is quite simple. When you dispute the tax lien, the credit bureaus will contact the court who issued the lien against you to verify that it’s accurate.
Since the IRS should have already contacted the courthouse to withdraw the lien, that will get reported back to the credit bureaus and the tax lien should be removed from your credit report.
It’s important to note that tax liens count significantly toward your credit score. A tax lien can destroy your credit in the same way as a bankruptcy, so it’s really important to get these removed as quickly as you can.