Both federal and tax liens are extremely negative on credit reports and many consumers are unaware a tax lien has been inserted in their credit reports. Tax liens can remain on your credit report indefinitely if unpaid.
Paid tax liens stay on your credit for 7 years. However, each state can vary; for instance, the state of New York only allows tax liens to remain for 5 years. Always check your state’s statutes to be sure.
Even if the tax lien is paid, it is still a negative entry which weighs heavily in calculating credit scores. If a tax lien is “released”, it will not increase your credit scores.
How to Dispute Tax Liens
A tax lien is a public record. There are vast amounts of public records, many containing the same names or similar names of consumers. The potential for errors in public records is enormous as information is passed to and from bureaucracies, court clerks and courthouses. Errors are rampant in public records. As you know you can dispute any error in your credit report under FCRA rules.
Simply disputing a public record error on your credit report may mean it gets deleted. The credit reporting agencies have 30 days to investigate a dispute. Bureaucracies are almost always slow to respond. The key to disputing a tax lien is to dispute a specific error.
Dispute one error at a time as you want to preserve any other errors for possible future disputes in case the first dispute does not result in a deletion. The IRS is slow, I doubt they respond to the credit reporting agencies’ request to investigate an error within the FCRA’s allotted 30 days. You are home free if the IRS fails to respond.
What if the Tax Lien is Re-Inserted
Negative credit items deleted because the furnisher of the information does not respond within 30 days can be re-inserted at a later date. Should the tax lien be re-inserted, the FCRA, Section 611 requires a notice to the consumer not later than (5) business days after the reinsertion. Were you notified? If not, dispute that violation with the credit reporting agencies and request immediate deletion.
Another, more lethal strategy would be to refer to FCRA Section 609 and request from the credit reporting agencies “the source of the information.” In other words request copies of the documentation used to verify the tax lien. Valid proof from the “sources of the information” is required. If they cannot provide that information, the tax lien must be deleted.
Pay the tax lien in full and get it removed
In February 2011 the IRS announced a change in how they deal with delinquent taxpayers. Consumers with delinquent taxes can pay a tax lien, under $25,000, in full or agree to a direct debit installment agreement and the IRS will direct the credit bureaus to remove the tax lien from your credit reports. Read more about paying IRS tax liens and having them deleted from your credit reports.