A tax lien is levied on your property or other assets by the IRS so that they can collect the back taxes that you owe to the government. Because this becomes public record, it is very damaging for your credit report since a tax lien placed by the IRS will supersede every other lien on your property. Thus, you become a very high-risk debtor to potential lenders.
Admittedly, this is one of the most difficult items to remove from your credit report. You will need to obtain a “Certificate of Release of Lien” which the IRS only hands out after you have paid off your entire tax liability. But if you are still in rough financial waters and can’t afford this option, you can try striking a repayment deal and get an Offer in Compromise (OIC) which will give you the chance to pay off your tax liability at a slightly lower amount. Note that there are specific forms that must be filled out for this as well as strict guidelines that must be followed so you should hire a lawyer knowledgeable in consumer law if you want to take this route.
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If your tax liability to the IRS is $25,000 or less, you can also opt to enter into an Installment Agreement with them under a direct debit payment arrangement scheme. You can then request to have your tax lien withdrawn if IRS approves you for this repayment plan.
Finally, if you have already settled your back taxes and they continue to appear in your report for more than seven years, be sure to dispute it with the credit bureau.
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