Advice on Tax Liens and Credit Report

How can i get a home with tax liens in my credit report?

How will you help me own my first home if I have tax liens - both federal and state - in my credit report? I have agreement with both and presently paying those. Please respond, I am very exited to hear from you if I can have a home of my own with your help.

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Bill's Answer
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Bills.com Team
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Thank you for your questions about your tax liens and their effects.

If you seek a loan to buy a home, your credit rating is one important factor lenders will review, before making a loan decision. Given your tax lien, which is most likely reported on your credit report, it will be more challenging to get approved for a loan. You may have to pay off the debts in order to get the liens removed.

For anyone seeking a refinance loan, tax liens have to be paid off  or removed, before any additional cash out can be taken from your property or even a rate and term refinance.

Easier to Remove Liens

Fortunately, in 2011, the IRS has made it easier to remove liens (and also easier to avoid having them filed in the first place). You may be able to get the lien off your credit report, depending on what you owe and whether you have been paying your installment agreement as agreed.

You may need to use any money you saved for a down payment to pay down the tax debt, especially the state tax debts. As inflexible as the IRS is, most state tax authorities are even less flexible.  I suggest that you see if you can get the IRS lien removed and work to pay off the state tax debt to get it off your report.

Most of all, it cannot hurt to apply and see what lenders think of your own situation. A good loan officer will advise you what steps you will need to take in order to qualify for a loan.

Bills.com makes it easy to compare mortgage offers and different loan types. Please use Bills.com to find a loan that meets your needs.

I hope that his helps you make the right decision for your particular situation, but be sure to shop around and find a loan that meets your needs.

Best,

Bill

bills.com

21 Comments

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  • LS
    Dec, 2010
    Legalbear
    A credit score is designed to convey to lenders the kind of financial risk you are as a customer. Your credit score plays a very important part in making 95% of lending decisions in the United States. An IRS lien can have a significant impact on the quality of your credit score and the borrowing opportunities that are open to you. An IRS lien can also have a significant impact impact on the interest rate you will ultimately pay for a loan. Out of the five main factors considered and thought to be the predictive indicators an IRS lien will have the most serious effect on your history. An IRS inquiry on your credit report will also raise the eyebrows of any potential creditor. An IRS lien or an IRS inquiry tells a creditor that you have not paid them on time or that you have the potential of going into serious derogatory status. Both history and inquiries are weighty factors that affect your score. Getting the IRS to obey the law as written is not rocket science. If an IRS lien is affecting your score, there are proactive steps available to cause the IRS to withdraw their lien and notify Equifax, Experian, and TransUnion of having done so. 26 U.S.C. § 6323(j) provides that the Secretary may withdraw a notice of a lien in certain circumstances. If the Secretary withdraws a notice of lien it shall be applied as if the withdrawn notice had not been filed. This provision of the Code provides that if the Secretary determines that the filing of such notice of lien was not in accordance with administrative procedures of the Secretary that such withdrawal shall be made by filing notice at the same office as the withdrawn notice. 26 U.S.C. § 6323(j) provides that a copy of such notice of withdrawal shall be provided to the taxpayer. 26 U.S.C. § 6323(j) also provides that the Secretary, upon written request by the taxpayer with respect to whom a notice of a lien was withdrawn shall promptly make reasonable efforts to notify credit reporting agencies, and any financial institution or creditor whose name and address is specified in such request, of the withdrawal of such notice. It seems highly likely that Equifax, Experian, and TransUnion will pay attention to a notice coming from the IRS. 26 U.S.C. § 6323(j) provides that any such request shall be in such form as the Secretary may prescribe. Congress has imposed so many laws on the IRS that they have made it virtually impossible for the IRS to get it right. The subtleties of knowing precisely what to look for with respect to what was not done in accordance with administrative procedures of the Secretary is helped by the Treasury Inspector General Audit Reports as well as use of the Freedom of Information Act requests. Since an IRS lien could reflect on your credit score 7 years from date satisfied; and up to 15 years if unpaid, it would seem to be in your credit scores best interest to track down what administrative procedures of the Secretary were not followed and notify the IRS of their obligation to withdraw their lien and notify the credit reporting bureaus of having done so as soon as possible.
    0 Votes

  • BA
    Mar, 2010
    Bill
    A tax lien can appear on a credit report for seven years from the date of payment. "Awareness" of a tax lien in your name is irrelevant, generally speaking. First, try to dispute the credit report error. I am pessimistic you will be successful, but it is worth a try if the county recorder made a simple error when reporting the delinquency to the credit reporting agencies. It is more likely that you will need to file a lawsuit against your ex-spouse to force him to pay the lien. Consult with an attorney in your state (perhaps the one who represented you in the divorce) about your rights and the possibility of filing a lawsuit against your ex-spouse.
    0 Votes

  • 35x35
    Mar, 2010
    Heather
    I just got my credit report and have sales tax liens on it from when my EX-husband had "his own business" How do I dispute them since I was unaware of it?
    0 Votes

  • BA
    Feb, 2010
    Bill
    Unlike other consumer debt where the clock starts at the date of first delinquency, the 7-year clock on tax debt starts when the debt is paid.
    0 Votes

  • 35x35
    Feb, 2010
    Neal
    I have/had a state tax lein that was filed in Nov of 1994. I paid the lein amount within a couple months. However, there were late fees I was unaware of and not stated in the documentation. Finally after lots of searching, I figured out that was the reason the lein had not been released. I then paid it off and the lein was released in Nov 2003. I have filed the release with the equifax and to date they still refuse to remove the lein from my report. Is this right? The lein was filed in 1994 (15 years ago)and the release was granted in 2003 (6.5 years ago). Any suggestions on how I might be able to get this removed from my credit report.
    1 Votes