Among the things an unpaid tax debt can expose a person to are tax liens. A tax lien can have many impacts on a taxpayer, including credit ramifications. Tax liens can show up on a person’s credit report, potentially significantly harming their credit score.
As our readers may have heard, some upcoming changes were recently announced regarding what the three main credit reporting agencies here in the U.S. will include in credit reports. Some of these changes regard tax liens.
Under these changes, certain types of tax liens will no longer show up on credit reports. Specifically, the new rules will make it so such liens can only be on a credit report if the records on the lien contain both the customer’s name and address and one of the following two things: the birth date or Social Security Number of the customer. Any tax lien not meeting this information requirement will no longer be included on credit reports starting July 1. One of the aims of the changes is to ensure that tax liens on a customer’s credit report do actually belong to the customer in question.
So, while some tax liens will be disappearing from credit reports come July, likely not all of them will. If a lien has the right information with it, it will still be able to show up on a person’s report. So, tax liens will continue to have the potential to have significant credit score impacts.
The impactful nature of tax liens means that how a person responds to facing such liens can matter greatly for many different aspects of their life. Skilled tax attorneys can provide taxpayers who have had a tax lien issued against them with guidance on their options for addressing the lien and the tax debt that underlies it.
Source: Forbes, “Credit Scores Will Improve As Credit Reports Exclude Negative Information,” Nick Clements, March 14, 2017