By LaToya Irby. Credit/Debt Management Expert
Welcome to About.com's Credit/Debt Management site, led by your guide, LaToya Irby. LaToya has been the credit and debt management guide since 2007. Read more
A tax lien is the right, usually by the county, state, or federal government, to take possession of your property or assets due to a delinquency on property taxes, or even income taxes. If the property is sold because of an unpaid tax lien, you may also default on your mortgage loan.
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You can prevent a lien from being filed against you by paying the tax in full or by setting up a payment arrangement with the agency you owe taxes to.
Tax Liens and Your Credit Report
Tax liens are public record and appear in the public records section of your credit report. They're considered to be one of the most negative credit report entries and can severely damage your credit score similar to a bankruptcy or foreclosure.
A tax lien entry on your credit report can keep you from getting approved for future loans, credit cards, apartment or rental, or even a job.
The normal credit reporting
time limit doesn't apply for unpaid tax liens. They can remain on your credit report indefinitely, but the credit bureau may remove it within 10 to 15 years depending on their policies. Paid tax liens can remain for seven years, unless the tax lien is withdrawn. When a tax lien is withdrawn, it's almost like the tax lien was never filed in the first place. You may have to send the credit bureaus documentation indicating the tax lien withdrawal to have the tax lien removed from your credit report.
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Removing a Tax Lien From Your Credit Report
If you have a Federal tax lien, you can have the lien withdrawn and removed after you've satisfied the tax obligation, you've filed your tax returns for three years, and you're current on any estimated taxes and federal tax deposits. Certain taxpayers may also be able to have the tax lien withdrawn by entering a direct debit installment agreement with the IRS allowing the IRS to automatically withdraw regular tax payments from your checking account.
If you're having issues with a tax lien, it's wisest to consult a tax professional about the best way to proceed.