Fixing Your Tax Problems to Repair Your Credit: What You Need To Know

“They say love makes the world go round, but that’s not true,” Sal M., who lives in Spencer, MA, said. “It’s money – or more correctly, credit! – that matters. If you don’t have good credit, you can’t do anything in this world. You can’t buy a house, you can’t start a business, you can’t go to school – I can’t even get a car that runs halfway decent because my credit’s all screwed up!”

Tax Liens Can Hurt Your Credit

Many people don’t realize that their tax problems can hurt their credit. When you owe money to the IRS or MA DOR (or both!), and you don’t pay your tax debt, you can wind up with tax liens. Tax liens are public record, which means anyone can find out about them. All of the credit rating agencies use tax lien information against you when determining your credit score.

A good credit score is, as Sal discovered, essential to the way we live our lives today. Even the US Government seems to have figured that out. That’s why there are special incentive programs in place to encourage delinquent taxpayers to resolve their tax issues and repair their credit.

Don’t Try To Fix Your Tax Problems On Your Own!

Working with a skilled, experienced firm that specializes in solving tax problems gives you the widest range of options when it comes to having your tax liens released or withdrawn. The IRS and MA DOR are not in the business of advising tax payers how to best solve their tax problems and restore their credit – they’re focused on collecting the maximum amount they can from you.

You May Qualify for a Fresh Start to Fix Your Credit

The Fresh Start Initiative allows delinquent tax payers who meet specific qualifications to take steps to repair their credit. If you owe the IRS less than $25,000 and can comply with a direct debit payment plan, after you’ve made 3 payments, you can request a lien withdrawal from the IRS.

This is only one of the ways you may qualify for the Fresh Start Initiative. Your experienced tax problem solver will fill you in on other available options to obtain a lien withdrawal. All tax lien withdrawals have a very positive impact on your credit rating. Be aware that you’re required to remain in full compliance with the tax laws going forward, and it’s an opportunity that’s only available once.

Is the Fresh Start Initiative right for you? The best way to get an answer to that question is to consult with an experienced tax professional. Schedule your free, no-obligation consultation today to discover how you can fix your credit and get your life back on track!

Solving Your Tax Problems: Confirming A Tax Lien Has Been Released

The news that a Braintree lawyer has gotten into trouble for filing false and fraudulent tax lien releases has raised concerns for some Massachusetts residents who have or have had tax problems with the Massachusetts Department of Revenue or the IRS.

“I’d hate to think we went through all the work of having our tax problems resolved only to discover it was a scam,” said John M., who lives in Framingham. “If someone tells you that they’ve fixed your tax problem, how can you check to make sure they’re telling the truth?”

Experience Matters: Find the Right Professional To Solve Your Tax Problems

There are only three groups of people who are legally allowed to talk to the IRS or MA DOR on your behalf in order to fix your tax problems: Certified Public Accountants (CPA), Attorneys, and Enrolled Agents (EA). These professionals have to be licensed. If someone tells you that they can fix your tax problems, and they’re not a CPA, Attorney, or EA, run – don’t walk! – away. Make sure that anyone you hire to help you fix your tax problems is licensed.

Next, make sure that the person you hire to fix your tax problems is experienced in resolving IRS and MA DOR tax problems. Having a federal tax lien released or withdrawn is not an easy process. The same thing is true for state tax liens. Someone who’s brand new to the tax world may have the best intentions – they really want to help you out! – but if everything’s not done properly, it’s you that winds up in hot water with the IRS or MA DOR.  

Be aware that not all CPAs, EAs, or attorneys are familiar with tax problems. You want to choose a tax professional who specializes exclusively in solving tax problems. Choose a tax professional who has a proven track record of getting the job done right.

Your Tax Problems Solved: Making Sure A Tax Lien Has Been Released or Withdrawn

If the IRS has placed a tax lien on your property, it’s very difficult to sell and your credit takes a major hit.  If you’ve hired someone to solve your tax problems, and you want to make sure that they’ve actually had your tax lien released or withdrawn, there are steps you can take to double-check their work.

Contact the tax authority – either the IRS  or MA DOR – and, using your Social Security number or Federal Employer ID number, request a literal transcript. This transcript will show all of the official activity on your account, including when the lien was issued and when it was released or withdrawn.

Be aware that it can take some time for a tax lien release or withdrawal to appear on your transcript.  If you don’t see the lien release or withdrawal on your transcript, ask your tax professional for a copy of the release or withdrawal. On the release or withdrawal, you’ll find the identifying information of the official who issued the release or withdrawal. On a federal release or withdrawal, you will see the IRS employee’s name and badge number, as well as the location it was filed and recorded. On a MA DOR  release, you will see the employee’s name and Registry of Deeds where it was filed and recorded. You can call the IRS or MA DOR directly to confirm that the lien release or withdrawal has, in fact, been issued in accordance with what you’ve been told.

Don’t Be Afraid To Double-Check!

You know how stressful it can be to have tax problems. The collection letters, the calls or visits to your home or workplace, the constant wait for the bad situation to get even worse…these things all add up. That’s why people get help to solve their tax problems.

Enjoy the peace of mind that comes with resolving your tax problems. Don’t be afraid to double-check  your professional’s work. You’re entitled to this information, and the tax authorities will give it to you. 

Getting a tax lien released or withdrawn allows you to sell your property and repair your credit.  These are important considerations in getting your life back on track. If you need more information about getting a tax lien released or withdrawn, give us a call. We’ll be glad to help!

Getting Rid of IRS Tax Liens and Fixing Your Credit Report

By Matthew J. Previte CPA MST
www.taxproblemsrus.com
July 12, 2011

Nothing can kill your credit rating like an IRS tax lien. Your credit report can drop about 100 points after an IRS tax lien is filed in the public record. Having a federal tax lien on your credit record can eliminate many lenders from loaning you funds to buy a house, a car, or to refinance your existing loan to get a more favorable rate. So just how do you deal with an IRS tax lien and fix the mess it has left in its wake? Well, to explain how, we need to start with what is an IRS tax lien, when does it come into existence, and how does one get it off your credit report.

IRS tax liens are filed in the public record to protect the federal government’s interest in IRS tax debts owed to it by you, the taxpayer. It is kind of like the IRS’s insurance policy. If you have any real estate or personal assets, the IRS tax lien attaches to it and allows the IRS to pursue enforced collection action (liens, levies, seizures) against your assets in order to collect what you owe them.

All IRS tax liens come into existence upon the assessment of a federal tax against a taxpayer. This usually happens when you file a tax return and it is processed by the IRS. However, federal tax assessments may also come into existence when the IRS audits your tax return, adjusts your tax return due to a mistake or missing W-2 or 1099, or they file a substitute tax return against you because you didn’t file a tax return. However the federal tax assessment came into existence, the IRS tax lien exists but is not effective against certain assets (like real estate) until it is perfected under state law by the filing of a federal tax lien in the public record.

The federal tax lien is filed in one of several places to insure it becomes public notice that you have an IRS tax problem and that the IRS has a federal tax lien securing the back taxes owed by you, the taxpayer, against your assets. Where an IRS tax lien is filed depends on state law. Some of the most common places the IRS files a federal tax lien is with one of the following: the Registry of Deeds or County Recorder, the office of county clerk, the office of town clerk, the office of probate judge, or the clerk of the circuit court. There are a few other places for some states but we won’t list them all here. The point is, state law controls where the IRS has to file its federal tax lien to be considered public notice that you owe them back taxes and that they have a claim against your assets. Most states have one place where federal tax liens need to be filed to be considered valid as against real estate while they have another place for IRS tax liens filed against personal property. To be sure, one must research their state’s law to determine where it requires federal tax liens to be filed.

To obtain a certificate of release of federal tax lien, one of several things has to happen. Either you have to full pay the tax, settle your tax debts through an Offer In Compromise and full pay the settlement amount, run out the statute of limitations on collection, or discharge the back taxes in bankruptcy. If there is real estate when you discharge any back taxes owed, the IRS will not release the lien until it expires. Liens generally last ten years but can be refiled if for some reason the collection statute has been extended beyond 10 years. There are several events that can extend the collection statute but we will discuss that in another article.

Keep in mind that with bankruptcy, some types of taxes are never dischargeable and for those types that are, you must have filed tax returns and wait certain periods of time before the taxes become dischargeable. There are also other rules beyond whether the taxes are old enough and of the proper type which must be met before one can qualify to file bankruptcy and discharge back taxes in bankruptcy. You should always consult a qualified tax resolution specialist as well as a bankruptcy attorney before filing. Otherwise, you may be surprised after you come out of bankruptcy court and the IRS is in hot pursuit, threatening to levy and seize every asset in sight.

To fix your credit rating, one must obtain a certificate of withdrawal of federal tax lien. A certificate of release of federal tax lien will not do as it only demonstrates that the IRS tax debts have been resolved to the satisfaction of the IRS. The problem with a certificate of release of federal tax lien is that it effectively lets the world know you have resolved your back tax debts but it does not remove the fact that at one time you owed the IRS back tax debts. Mailing a copy of the IRS certificate of release of federal tax lien to the big three credit agencies (Equifax, Trans Union, and Experian) only helps them update your credit file and notate that you have resolved your outstanding back taxes with the IRS. The original federal tax lien will stay on your credit report, along with the notation that it has been resolved, for 7 years. This hardly restores your credit score to its former level pre-IRS lien.

Obtaining a certificate of withdrawal of federal tax lien necessitates first requesting and receiving a release of federal tax lien with one exception which we will discuss in a bit. Once the back tax debt has been resolved through normal means (either full paid, discharged in bankruptcy—with no real estate owned, settled through an Offer In Compromise, or the collection statute has expired) and a certificate of release of federal tax lien has been requested by the taxpayer and issued by the IRS, then a request can be made for a certificate of withdrawal of the federal tax lien and the IRS will issue a certificate of withdrawal of federal tax lien.

As stated above, there is one exception where there is no need to obtain a certificate of release of federal tax lien first before requesting a certificate of withdrawal of federal tax lien. In fact the strange thing is that IRS procedure does not allow for a certificate of release of federal tax lien to be issued unless one of the above four criteria is met but it will allow a certificate of withdrawal of federal tax lien to be issued under new guidelines if the taxpayer enters into a Direct Debit Installment Agreement. Only certain taxpayers qualify to enter into a Direct debit Installment Agreement and they must meet one of several eligibility requirements as well.

Due to the current state of our economy, the IRS realized that the filing of federal tax liens was doing great damage to people’s credit ratings and their ability to borrow money for life’s necessities (car, home, college tuition, etc). So, they developed a new program that would allow those taxpayers who have resolved their tax debt or entered into a Direct Debit Installment Payment Agreement and that are currently compliant with all tax filings and current tax estimates or withholding levels, to request a withdrawal of federal tax lien. What the withdrawal effectively does is eliminate the effect of the original federal tax lien. It’s as if the original federal tax lien should have never been filed by the IRS in the first place. With a certificate of withdrawal of federal tax lien in hand, you can effectively remove and completely eliminate any trace of the federal tax lien from your credit report as if it never existed.

Are You Part of the “IRS Tax Lien Explosion”?

Reading this article can leave the typical taxpayer feeling a little nervous. If you’ve already had trouble with the IRS, or are currently trying to resolve tax problems, that article, which charts the dramatic increase in IRS tax liens, might make you very nervous indeed!

The IRS Is Stepping Up Tax Enforcement Efforts

Earlier this month, National Taxpayer Advocate Nina Olsen released her annual report to Congress. The Advocate expressed continuing concern that the IRS’s increasing use of hard-core enforcement actions, particularly tax liens, is inflicting unnecessary harm on financially struggling taxpayers.

Over the past seven years, the IRS has filed more than five million tax liens. 1.1 million liens were filed in 2009! The impact of these liens is tremendous. The individual tax payer will have their credit negatively impacted, making it harder for them to borrow money to buy a house, car, or fund a child’s education. A tax lien can affect a taxpayer’s employability. Not every company is willing to hire someone who’s had trouble with the IRS.

What To Do About Your IRS Tax Lien

If you have received a notice from the IRS about a potential or impending federal tax lien, don’t panic! There is hope for your situation. Begin by realizing you need to get help right away! Resolving tax problems requires expert, experienced assistance. Don’t try to go it alone!

There are many routes to settling old tax debt and eliminating federal tax liens. Don’t trust anyone who claims to know the solutions to your tax problem before they understand your unique circumstances! Every tax problem is different. You want a qualified tax professional to work with you to discover the best way to resolve your tax issues.