Home> Credit Library

TAX LIENS: Settle, Remove and Improve Your Credit

Seems to be one of the most talked about topics. How to settle taxes, remove them from your credit reports and generally rid yourself of the whole unpleasant experience. Generally speaking, once a tax lien it your credit reports, it was there for a nice long stay, but recently (Feb. 2011) the IRS announced that they would now remove federal lien records from your record. It's not done automatically, but at your request, the IRS will now take the item off after it's paid. The form can be found here. You need to complete it and submit it to the IRS for removal.

To Settle Back Taxes
The IRS often accepts OIC (offer in compromise) for taxes, especially if you show undo hardship and inability to pay your taxes. You should find a qualified tax attorney to help you with a situation this serious to make sure you get the best offer. Many attorneys specialize in tax law and can cut your tax debt in half using their negotiation skills. These attorneys and tax professionals know what to look for and avoid big mistakes like paying off a tax debt that is nearing the statute of limitation. Big mistake. You can also search for a tax specialist using our custom LawInfo search.

Finally, according to the IRS, offer and compromises are very do- able, they're done every day and here is a little of what the IRS considers:

Generally, we approve an Offer in Compromise when the amount offered represents the most we can expect to collect within a reasonable period of time. Although each case is evaluated based on its own unique set of facts and circumstances, we give the following factors strong consideration in the evaluation:

The taxpayer's ability to pay
The amount of equity in the taxpayer's assets
The taxpayer's present and future income
The taxpayer's present and future expenses
The potential for changed circumstances ]

The IRS Code states: "We will accept an Offer in Compromise when it is unlikely that we can collect the full amount owed and the amount you offer reasonably reflects the collection potential." Internal Revenue Code, section 7122.

Statute of limitations on tax liens (collectability)
The statute of limitations under which a Federal tax lien may become "unenforceable by reason of lapse of time" is found at 26 U.S.C. § 6502. For taxes assessed on or after November 6, 1990, the lien generally becomes unenforceable ten years after the date of assessment. For taxes assessed on or before November 5, 1990, a prior version of section 6502 provides for a limitations period of six years after the date of assessment. Various exceptions may extend the time periods.

Release of Federal tax lien
In order to have the record of a lien released a taxpayer must obtain a Release of the Notice of Federal Tax Lien. Generally, the IRS will not issue a notice of release of lien until the tax has either been paid in full or the IRS no longer has a legal interest in collecting the tax. The IRS has standardized procedures for lien releases, discharges and subordination. In situations that qualify for the removal of a lien, the IRS will generally remove the lien within 30 days and the taxpayer may receive a copy of the Certificate of Release of Federal Tax Lien.

Offer in compromise on the tax lien
A properly submitted offer in compromise does not affect a tax lien, which remains effective until the offer is accepted and the offered amount is fully paid. Once the compromised amount is paid, the taxpayer should request removal of the lien from their credit reports using this form.

(note: Paid tax liens can now be removed from your credit because of changes by the IRS in 2011. The removal is not automatic. You must file this form to request removal.)

Find More Credit/Collection Articles:
Repossession & Your Car | Bankruptcy - All you need to know | Statute of Limitations | Restricted Settlements | Judgments | Sample Letters | Credit Re-Scoring | Debt Management vs. Debt Negotiations | Credit Counseling vs. Debt Consolidation | DIY Credit Repair Help | How To Improve Your Credit History | Dealing with Tax Liens | Delinquent Student Loans | Collection Agency Abuse Tips | Best Credit Repair Resources on the Web | Credit Repair & Common Sense | Credit and Divorce | Attorneys General By State | Car Loan Default Consequences | Cease and Desist Letter | Collection Laws All States | Dealing with Medical Collections (HIPPA) | Credit cards & bad credit | How to fix your credit | What can a credit repair service do for you? | See All Credit Repair Articles--->

Find Services: Credit Repair & Consumer Attorney | Credit Repair Companies | Debt Settlement Firms | Bankruptcy Attorney | See All Credit Services --->

Popular Tags: VOD | SOL | RE | DIY | Settlements | Disputes | CRA | CA | OC