A lien can affect your credit score negatively and will stay on your credit report up to seven years
California (OPENPRESS) June 1, 2012 - Did you hear it? Americans everywhere just breathed a collective sigh of relief - tax season is over for another year.
For many, however, it means finding the money to pay Uncle Sam. Not paying isn't an option - if you want to remain in good standing as a citizen. It's also not an option if you want to maintain a good credit score.
Not paying your taxes can result in a tax lien, which will be reported on your credit report by the credit reporting bureaus. A tax lien is a negative item, and will remain on your credit report for seven years from the date the tax liability is resolved. It can remain even longer if it isn't resolved.
How great of an impact the lien has depends on the lien information. Your credit score will take the biggest hit when the tax lien is a recent one and you have no other negative items, such as missed payments. This is where your credit score could take a hit of 100 points or greater.
But bear in mind, this is only if the IRS places a lien. Nearly one-third of all taxpayers think that timeliness of income tax payments is the greatest factor when it comes to credit scores. And most people who expect to have to pay Uncle Sam wait until the last minute to file, while those who expect a refund will file early.
The IRS doesn't typically report to the three credit bureaus - Experian, Equifax, and TransUnion - when it comes to delinquencies, payment plans and late payments. A lien, however, will show up.
Even so, the IRS has taken steps in recent years to reduce the number of liens it places on taxpayers, mostly due to poor economic conditions, including high unemployment.
Here are some tidbits about tax liens and getting them removed from credit reports that you may find useful.
• The IRS has 30 days to release the lien after you have paid your debt.
• Once the IRS has released the lien, it could take a while for the credit bureaus to be notified. You should order three official copies of the release from the IRS and send them to the credit bureaus yourself.
If you find a lien on your credit report that you were unaware existed, contact the IRS immediately, and request it be investigated. You won't get results quickly, but you will get an answer.
Once you find out if the lien is legitimate, make sure to take steps to pay your debt as soon as possible. Remember: This negative mark will stay on your credit report up to seven years. Take care of it now.
