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How to Remove a State Tax Lien from Your Credit Report

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remove tax lien from credit report

If you have a state tax lien on your credit report, it means that the government claims you owe back taxes. This is why they filed a legal claim against you and listed the lien in public records.

If you have a state tax lien on your credit report, it’s essential to take steps to remove it as soon as possible.

A state tax lien can damage your credit score and make it difficult to get approved for loans or other types of financing.

In this article, we will walk you through the process of removing a state tax lien from your credit report.

A state tax lien can be

Unpaid

The term “unpaid lien” refers to a tax liability that has not been fulfilled. The status will stay on your credit report (and the lien will remain in force) as long as the sum is not compensated or otherwise resolved.

Paid 

A paid or released lien means that the debt in question has been paid and the lien is no longer active. This will stay on your credit report for seven years from the release date of the lien.

Withdrawn 

The state tax agency has removed the withdrawn lien from the public record. This means it will not show up on your credit report.

How a Tax Lien Affects Your Credit Report

A tax lien can have a long-term negative impact on your credit score, which can make it difficult to buy a home, borrow money for school, or achieve other goals.

It is very important to learn how to remove a state tax lien from your credit report. If you are unable to pay your tax lien, the damage to your credit score will be permanent.

Tax liens are one of the few credit issues that do not have to be deleted from your credit report. This is according on the Fair Credit Reporting Act. As a result, you should try to avoid having a tax lien on your record.

IRS Fresh Start Program 

There are different ways that federal and state tax liens are treated by creditors.

The IRS Fresh Start Program allows for the early removal of federal tax lien marks from your credit report.

You can have the lien canceled after you have paid all your taxes, or after you have made three payments under a payment arrangement.

Finally, you can request the lien be removed from your credit report by Equifax, TransUnion, and Experian.

This program is not accessible to people who only have state tax liens, but you can still request your state taxing authority to cancel the debt. They are under no obligation to do so.

How to remove tax lien from credit report

To get a tax lien removed from your credit report, you will need to follow these guidelines and meet the qualifications.

Copy of your credit report

You can get a copy of your credit report from annualcreditreport.com for free. Check the public records section of the report to see if your tax lien is listed.

Pay off the balance

You can pay your state tax agency off in a lump sum or in installments. Make sure you get the terms of any installment agreement in writing, including what will happen if you don’t keep up with the payments.

How soon can you be debt free?

Keep Documents saved

Keep all documents related to the tax lien and your repayment plan. Once you have paid the lien amount in full, request a letter from the state tax agency stating that the debt has been paid.

You will need to send this paperwork to the credit bureaus. The process for obtaining this release form varies by state.

  • Dispute the lien with the credit bureaus: Request that it be removed. You can do this either on the phone, through the mail, or online. However, you need to dispute the loan on each credit bureau. Each bureau has its online dispute process. This is usually the easiest way to file a dispute. You can also check the status of your request periodically this way.
  • Dispute the lien by mail: You should send a certified letter to each credit bureau to let them know that you have repaid the loan in full. You will need to provide documentation that the back taxes have been paid. This includes the file number of the lien (which you can find on your credit report), as well as IRS Form 10916(c). You should also include a copy of your credit report, with the tax lien section highlighted. The FTC offers a dispute letter form that you may use as a guide.
  • keep a copy of all related records. The credit bureau will have to respond to your request within 30 days and decide the lien within 90 days. Most cases will be resolved within four months.

How to Avoid a State Tax Lien

If you can’t afford to pay your state taxes, you should try to work something out with your state tax agency before they put a lien on your property.

There are different steps you can take depending on the state you owe taxes to. If you’re worried about your state taxes, here are some things you can do:

  • It is always a good idea to file your taxes, even if you think you will owe more than you can afford. The penalties for not filing are much higher than for late payments.
  • Contact your state tax agency to learn about payment plans. If you make a reasonable faith effort to pay some of the debt, the agency will likely be willing to work with you.

Need to negotiate a state tax lien? We can help

If you don’t file your taxes, the state tax agency will eventually find out, and you will have to pay a lot of money.

The cost of ignoring your taxes is much more than if you face them head-on. This is because penalties, interest, and fees will continue to add up and become very high.

To obtain assistance from a tax professional, call now.