All tax liens were removed from credit reports as of April 2018, due to the frequency of incorrectly reported judgments and liens. However, although tax liens are no longer reported on credit reports, it’s possible that the bureaus could roll back this policy at a future date.

In this guide, we’ll help you understand what a tax lien is and how it could potentially affect you financially. In the case that tax liens are added to credit reports once again, or if you discover a tax lien currently on your credit report, this guide will help you work to remove it.

A tax lien is a legal claim made by the government against your property upon the failure of tax payments to the county, state or federal government.

Tax liens can be filed against you if you fail to pay your taxes on time. When this happens, the government can legally make a claim against your property or garnish your wages.

At the federal level, liens are placed when income taxes aren’t paid. At the state or county level, they can occur for both income and property taxes.

A lien doesn’t automatically mean your property will be sold—it means that the government has the first claim on your property ahead of other creditors. A tax lien can prevent you from refinancing or selling your assets.

Starting in 2018, all three credit reporting agencies changed how public records are reported in their systems under the National Consumer Assistance Plan (NCAP).

The new rules require that public records data must contain a consumer’s name, address, social security number and/or date of birth. All liens were dropped from reports in April 2018.

Unfortunately, credit bureaus can choose to change their policies again and report on tax liens as long as they follow the stringent reporting requirements under the Fair Credit Reporting Act (FCRA). Until that policy changes, be vigilant about monitoring your credit reports (you can request a copy from all three via AnnualCreditReport.com).

Additionally, it’s important to remember that a tax lien is related to more than the property and assets you own at the time it occurs. A tax lien will extend to any property you acquire in the future if the tax debt is not paid.

The IRS will send a letter explaining what you owe and demand payment in full. Usually, they send a series of letters over a six-week period, letting you know you owe money.

If you do nothing to settle the tax debt, the IRS will notify you of a federal tax lien. The “Notice of Federal Tax Lien” will arrive by mail. The lien will also be filed with your local courthouse, becoming a public record.

One important distinction to make is the difference between a lien and a levy. A lien is a “claim” on your property, while a levy is the actual seizure of your property. You are given time to pay the taxes owed and remove the lien before the IRS moves to the levy stage and seizes your property and your wages.

To pay the lien, contact the appropriate state or federal tax office to confirm your outstanding debt. The IRS will sometimes let you set up a payment plan or installment agreement. Once you agree to a payment plan, stick with it until the lien has been paid in full.

If a tax lien is still listed on your credit report, or other unfair negative credit items are hurting your credit score, Lexington Law is here to help. Our credit repair specialists do the hard work and organization required to remove unfair entries from your credit report.

Learn more about our credit repair services or contact us today so we can discuss your credit score goals and how we can help.