A tax lien is a legal claim the government has over your property when you fail to pay a tax debt. When the IRS sends you a bill after accessing your liability and you fail to pay the full amount of the debt in time, they may issue a notice of federal tax lien.
When this notice comes, you shouldn’t ignore it because it is really important and is proof that the government did not take you unaware, they informed you before enforcing the tax lien. This lien functions to protect the government’s interest in your property and ensures that they recover the revenue due to them.
It is best to avoid a lien because it means that the IRS now has a stake in your assets. To avoid a lien, you must settle your taxes in full and in good time. If you are unable to resolve the amount you owe in taxes due to a financial issue or any other reason, then it is in your best interest to seek the help of a qualified tax professional (get a tax attorney link) to help make an agreement with the IRS on your behalf.
Your credit score is simply a number that depicts how creditworthy you are. The higher the number, the better for you because a high credit score makes you look good to potential lenders. Your credit score is largely dependent on your credit history, however, there are a lot of things that can hurt your credit score if not addressed immediately.
You may be wondering if a tax lien can decrease your credit score. The answer to that is no.
Prior to 2017, a tax lien could have severe impacts on an individual’s credit score by decreasing it drastically. Worse still, tax liens were not easily taken off credit reports; even a resolved tax lien could remain on an individual’s credit report for up to seven years. Howbeit, this changed in 2017 and 2018 when certain changes were made to what the three major reporting bureaus – Equifax, Experian, and Transunion – show on their credit reports.
Tax liens were completely removed from credit reports in 2018. This was good news to a lot of people as it increased their credit score when the negative impact of having a tax lien on their credit score was taken away. This does not in any way imply that tax authorities will not make efforts to collect payments. It just means that it won’t be part of your credit history. This applies to both federal and state liens.
How many points does a Tax Lien decrease your Credit Score?
Tax liens definitely have bad repercussions but a decrease in credit score is not one of them anymore. While reviewing your application, some lenders like mortgage lenders may still want to see your lien information. Lenders also have a way of finding out about your lien information, so it is important to pay off your tax debt as soon as possible to avoid the negative repercussions of having a tax lien leveled against you.
A tax lien may affect you in other ways negative but it will not decrease your credit score. Since your tax lien is not reported on your credit score, it can not affect it, thus, it can not decrease it.
The fact that tax liens no longer affect your credit score, however, does not imply that they should be taken lightly. A tax lien has serious implications, and despite the fact that it can no longer mar your credit report, it can remain in place for up to 10 years. This means that the government can have the largest stake in your asset for up to ten years or more.
If you have received a notice warning you of an impending tax lien that may be placed on your account, then it is in your best interest to contact us now. We are a tax relief firm dedicated to giving you the best results regarding resolving your tax debts. Our team of qualified professionals is available round the clock to provide you with the assistance you need. Contact us now at 888-585-8629 or 617-430-4674 or send us an email at [email protected].
We can help you ensure that the tax lien placed against you is withdrawn by applying for the Fresh Start Initiative on your behalf. Contact us now for a free case review.
For more information, email [email protected]