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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  • 35x35
    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

  • 35x35
    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

  • 35x35
    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

  • 35x35
    Sep, 2009
    Bill
    Pull a copy of your credit reports from all three major U.S. credit bureaus -- Equifax, Experian, and TransUnion. I recommend AnnualCreditReport.com. Dispute the derogatory entry with each of the credit bureaus that include it. See the Bills.com Debt Self-Help Center for a sample dispute listing letter. My guess -- note that word choice -- is that the entry in question is an error. If it is not, the dispute listing letter will flush-out the creditor to you, which will allow you to deal with the lien.
    0 Votes

  • 35x35
    Sep, 2009
    destiny
    I have a tax lien on my credit report, but I don't know why. How do I find out who to contact about this. It doesn't list a state just a plaintiff # and dockett #.
    0 Votes

  • 35x35
    Jul, 2009
    Mark
    Contact the state and see if a miracle will occur and the tax agent you speak to recognizes the error, reverses it, and refunds the money to your business. If you get nowhere, however, I think it is time to bring in an attorney who has experience in tax matters in your state. After you lay out all of the facts, ask the attorney if he or she thinks you have a cause of action for negligence against the agents who initiated the levy.
    0 Votes

  • 35x35
    Jul, 2009
    Ken
    My corporation was under an extensive sales tax audit. After 100's of hours of work, the state determined I had underpaid a small amount of about $1,500. I was told I would receive a notice of the actual amount due including penalties. 6 week later I received a notice that showed about $18,000 due. This wasn't correct. I called the state and discovered that the state had not recorded a recent payment correctly. I had to get faxes of the canceled check for them. The state acknowledged that there was an error and informed me by phone that the would figure out the correct amount due. The next I heard from them was when I received notice of a tax lien. Two days before I received the tax lien, the amount due was electronically removed from my account. The notice of a tax lien was the first time i had been informed of the actual amount due. This is effecting my credit rating. How can I get this lien removed (vacated)? Should I contact the state, or will I need an attorney?
    0 Votes

  • 35x35
    Apr, 2009
    Jim
    If you have a judgment on your credit report, then it does not mean that you can never get a loan. Mortgage companies look at how old the judgment is and for what amount, and are also looking at a lot of other factors such as income and debt ratio, before they can approve your loan. While I would not take her response at face value, you should definitely resolve the tax issue if you are looking to apply for a mortgage. You can get a free consultation about your tax issues at www.freedomtaxrelief.com.
    0 Votes

  • 35x35
    Apr, 2009
    johanna
    i am disabled and no longer work. i want to purchasse a home. i recently found out i have a state tax lien from 1993. i surfed the net and mortgage co. emailed this response. id want too know if this is true. hi johanna, You cannot roll the lien into the loan unfortunately. I would contact the state again and find out if they are releasing you from payment. You can talk to whom ever is in charge. The reason it stays on your credit is because a lien is filed with the court and the court reports it to the credit agencies. If they will accept a payment plan and do expect payment you will be able to qualify for a loan as long as you can show proof. Please let me know what they say.
    0 Votes

  • 35x35
    Apr, 2009
    Bill
    I am not aware of any specific program that helps people with IRS debt liens.
    0 Votes

  • 35x35
    Apr, 2009
    Matt
    I am working with JK Harris to pay off my tax liens. I would like to purchase a home. Is there a way to get a mortgage on a home? Is there a program through the government?
    0 Votes

  • 35x35
    Mar, 2009
    Bill
    It will certainly make it difficult, but not impossible to purchase a home. It will come down to your mortgage lender decision. The point of a tax lien is to place a secured senior claim from your outstanding tax bill. If you have a lien on a house, it prevents you from just flat out selling the house without clearing title, which means you would have to pay off mortgages and liens first. Read Publication 594 (What You Should Know About IRS Collection Procedures) for more information about tax liens and how to have them removed at the IRS website, www.irs.gov. In addition if you purchase a house, it's going to throw up a red flag to the IRS. They will question why you have money to buy a house, but to not pay them and it could bring them down on you and you might get a call from a revenue officer. Your best bet is going to be to get in touch with a trusted accountant in your area or a tax resolution firm such as www.freedomtaxrelief.com, who specialize in this type of thing. Work with them to get the lien released, work out a payment plan with the IRS, etc. You don't want to try to purchase a house without consulting one first. Many will do either free or rather cheap first consultations.
    0 Votes

  • 35x35
    Mar, 2009
    Harold
    I have a tax lien on my credit report. I want to purchase a home. How will this lien affect my chance to buy a home?
    5 Votes

  • 35x35
    Feb, 2009
    Bill
    That really depends on what your FICO score is. Keep in mind that this lien will show till it is paid in full, so till that time, it is going to adversely affect your score. But, as you state that you have a strong co-signor, you might be able to explain the situation to your perspective mortgage lender and see how it goes, there are still no guaranties.
    0 Votes

  • 35x35
    Feb, 2009
    scot
    i have a state sales tax lien on my credit. I have work out a payment plan with the state on indiana. My total bill is about 31000.00 my monthly payment is 586.00 per month. Can i still get a mortgage with this on my credit. Everything else is ok and i have a very strong Co-signer.
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    To Fran - You will have to dispute that information with each of the 3 credit bureaus by writing to them individually and also sending them the necessary paperwork. The FTC provides a comprehensive guide to dispute credit reports here: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    To Joe - Valid information cannot be removed from your report, but will automatically fall off after the 10 year mark. Keep in mind that information will stay on your report for 10 years from the last payment date. Each of the credit reports will also state the date till which the entry will show. You will need to check your credit report for this date.
    0 Votes

  • 35x35
    Feb, 2009
    Fran
    In '93 I was charged with tax fraud and had a tax lien of over 3 million dollars charged. It was proven that I did not commit the fraud and the guilty party that used my name was charged. I got a full dismissal from the judge and entered an agreement with Taxation & Revenue to give them half the money for a vehicle that I co-owned with the guilty party and then would owe them nothing more. I have all paperwork to this effect but 16 years later still cannot get anyone to take the 3 million dollar tax lien off of my credit report. How can fight this?
    0 Votes

  • 35x35
    May, 2007
    Joe
    I have a tax lien that I paid off 10 years ago. How long do I have to wait before it is taken off my credit report. Do I have to contact any of the credit bureaus to remove that after the 19th of this month.
    2 Votes