Posted by Jim McClaflin, EA, NTPI Fellow

Steps to Getting Rid of an IRS Tax Lien from Your Credit Report

Steps to Getting Rid of an IRS Tax Lien from Your Credit Report

One of the not-so-good aspects of a credit report is getting rid of negative listing even after its payment or the difficulty in removing it. By logic, it seems reasonable that as soon as you pay off any item such as a collection account, a credit card bill or judgment, such will leave your credit report. 

Sadly, this has not been the case as credit reporting laws operate differently. Negative items or debts you have paid off could remain on your credit report for the entire period the law specifies it, even after payment. 

This was also the case with tax liens from Uncle Sam even after settlement; as such liens will remain on your credit report for up to seven years. This has changed, however as Uncle Sam has made available steps to get rid of this as there is a process with which taxpayers can get rid of settled federal tax liens from one's credit report forever. 

Here are the steps explained below:

  1. Complete IRS Form 12277

Form 12277 is the official request for withdrawing the tax lien. Make sure to have the Form 668(Y) that Uncle Sam sent you handy – the form notifying you of the original and main tax lien. Having this form handy can help to speed up the entire process. However, it is not compulsory to have Form 668(Y) as one can still complete Form 12277 without it.

For the 11th question on form 12277, we recommend going with the option that states reveals. 

“The taxpayer, or the Taxpayer Advocate acting on behalf of the taxpayer, believes withdrawal is in the best interest of the taxpayer and the government.”

For the 12th question, you will need to type the following 

“Fresh Start Program”


  1. Forward Form 12277 to Uncle Sam 

With IRS Pub 4235, you can determine which of IRS's regional offices where you will mail the form. The form will be mailed using certified mail.


  1.  Wait For Uncle Sam’s Response 

Within 30 to 45 days, Uncle Sam will get in touch with the courthouse that issued the lien with a notification to withdraw it. The taxpayer also gets a copy of such notification.


  1.  Contact the Credit Reporting Agency and challenge the Lien

You can contact Equifax, TransUnion, or Experian through their webpage and challenge the tax lien. They will also get in touch with the courthouse that filed the tax lien to know the validity and accuracy of such information. Removing the lien on time will be possible since Uncle Sam already told the courthouse that they withdrew the lien.

 

  1.  Final Confirmation

You will get a notice from all the credit agencies notifying you of the output of the lien dispute. Should the lien remain in any or your entire report, your call here is to file another dispute via writing and attach the notification that Uncle Sam sent, informing that the lien was withdrawn successfully.


Conclusion 

A tax lien on your credit report might not have a detrimental effect on the credit score. However, it is enough to discourage a lender from denying you access to a loan. This makes it essential to get them resolved as soon as you can. You can contact a tax professional if you need options to take care of an unpaid tax lien.


FOR MORE INFORMATION ON HOW JIM McCLAFLIN, EA, NTPI FELLOW CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.


THANKS FOR VISITING.

Jim McClaflin, EA, NTPI Fellow
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