Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous eBook Stop donating your money to IRS which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.
When a tax lien shows up on your credit report, your FICO score takes an immediate plunge. If the lien is on your report in error, you can take steps to have it removed. This will involve contacting the credit reporting agencies in writing, and advising them that you dispute the recorded lien. Also, ask them to validate the lien. If the lien is validated, the only way to remove it from your credit report is to pay it off.
The Internal Revenue Service and your state government often will agree to partial payment on tax liens. In many instances, they will work out a payment plan for you to pay your tax debt off in installments. In proposing such a deal to your state government or the Internal Revenue Service, you are making an “offer in compromise” (OIC).
Several things will be taken into account before your state government or the Internal Revenue Service determines whether or not to accept your offer in compromise. Your income, of course, is a key deciding factor. Other relevant components of your financial circumstances will be considered as well, such as your assets and liabilities, and what the state government or Internal Revenue Service is looking to recover.
Your offer in compromise will also be affected in a positive way if you can attach documentation supporting a claim of hardship. Hardship can result from a lay off or loss of employment. There are variables outside of your financial situation that can also support hardship, such as illness or death. If you have circumstances of this mature, be certain to make your state government or the Internal Revenue Service aware of them, as they will go a long way to aiding your cause.
Tax debts can be collected for ten years. The negative impact on your credit report can remain visible for seven years. That equates to serious damage to your credit availability and may even jeopardize your current accounts like credit cards.
Once your lien has been handled and paid, it is good to wait for at least ninety days and send letters of dispute out to all three credit-reporting bureaus once more. Many times the state government and Internal Revenue Service will ignore requests for tax lien validation once the lien has been resolved. Their failure to respond will force the credit reporting agencies to remove the negative mark from your tax report.
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