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taxliens can they be deleted once paid?five years old, if i pay it off will my Credit score increase

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When you have an unpaid Federal tax bill with the IRS, your state, your city, or your county, a tax lien can be filed in an effort to force you to pay your outstanding tax obligation. Liens exist to protect the right of the government to claim your personal property (money or actual property) in the event you do not pay your taxes.

When a tax lien is filed it is recorded as a public record and, therefore, can be viewed by anyone…including credit reporting agencies.

Many people with tax liens on their credit reports mistakenly believe that the IRS or the state tax authority has directly reported the lien to the credit bureaus. That is a myth. Rather, the credit bureaus themselves proactively seek out tax liens plus other public records like judgments and bankruptcies, in order to include these public records on consumer credit reports. Tax authorities are not “data furnishers” to the credit bureaus like banks and collection 

Tax liens are one of the most difficult credit issues for a consumer to overcome. Since tax liens are considered by FICO and VantageScore to be a derogatory item, there is a chance that your credit scores could be lowered by the lien. Even when a tax lien is paid and released, your credit scores will likely continue to be negatively impacted by the lien for many years as long as it’s on your credit files.

Unfortunately, there is a strong possibility that an unpaid tax lien will stay on your credit reports forever. Tax liens, unlike regular collection accounts, are not required by law to be removed from your credit reports after 7 years. In fact, the Fair Credit Reporting Act (the federal law which governs credit reporting) says that a tax lien is not to be removed from credit reports until 7 years from the date the lien is paid and released.

Unpaid tax liens can remain indefinitely. In layman’s terms…FOREVER.

If you currently have outstanding federal tax liens, here is some good news. There is a way to have paid federal tax liens removed from your credit reports prior to 7 years from the date when the lien is released. In 2011, the IRS introduced the Fresh Start Program, which contained a new policy regarding the way the IRS handles federal tax liens.

The highlight of the new program is the fact that if a taxpayer will pay his/her outstanding tax bill in full, then the IRS will allow for the lien to be withdrawn upon request by the taxpayer. There is even a chance for certain eligible taxpayers to have their federal liens withdrawn by the IRS once they have entered into a payment arrangement (agreeing to pay the tax obligation in full) and have made a minimum of 3 payments.

If you can have your lien withdrawn, be sure to notify all 3 credit bureaus and request that the lien be removed from your reports. The credit bureaus do not currently report withdrawn tax liens on consumer credit reports.

The IRS’s tax lien policy does not apply to state tax liens. Still, if you have paid a state tax lien then you can always request a withdrawal. While it is unlikely that you will receive a withdrawal of a state tax lien, it certainly cannot hurt to ask. If your request is approved, then you can follow the procedure above to have a paid state tax lien removed from your credit reports as well. Otherwise, you will need to wait until 7 years from the date of release for the lien to be removed from your credit reports.

Remember: paying your tax lien will immediately remove and release it, but be prepared for seven more years of credit reporting.

Getting a tax lien removed from your credit report is not always possible, and the process is complex and potentially lengthy. We’ve put together a list of the steps you should take to have the best chance of having your lien removed. The process is very similar for both federal and state tax liens, but you’ll be using different types of documents for each.

1. Request a Copy of Your Credit Report and Check for Accuracy

You can receive a free report from Any reported tax liens can be found on the public records section of the report. Once you have found the tax lien, you need to check the balance information. You must pay all liens in full before a credit bureau will consider removing the bad debt.

2. Contact the Appropriate Tax Office

Contact your federal or state tax office to confirm the outstanding balance and pay off whatever is left. This is a great opportunity to agree upon a repayment plan or if you have the ability, pay the debt in full. You must settle the debt in full or you will further damage your credit and will be prevented from removing the lien. Be sure to get your repayment agreement in writing.

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