28
Feb

So you’ve pulled your credit report and found a mysterious item on it – a tax lien.

What is a tax lien?  A tax lien is a document filed with a county government notifying the general public that a taxpayer has an unpaid federal or state tax debt.  Once a balance is determined to be owing, the appropriate tax authority sends a notice to the taxpayer.  In the case of a federal tax bill, if no payment is received 10 days after the notice, a lien is assessed and the document filed in the county of residence.    For outstanding state taxes, various states have different policies on how quickly liens are filed after notifying the taxpayer of an unpaid balance.

A lien attaches all of your assets such as real estate, cash, securities or vehicles.  Any lien filed applies not only to property owned at the time of the tax lien, but any property obtained while a lien is in effect.

Credit bureaus find out about tax liens through collection efforts by representatives of the credit reporting agencies or when the government provides information directly to them.  Tax liens are devastating to your credit score, dropping a good score by as much as 200 points.

However, as with any piece of information appearing on your credit report, mistakes occur.   I received the following inquiry from a reader regarding an erroneous tax lien:

Q.  I just pulled my credit report and I notice I have a state tax lien on my report from New York.  I live in Nevada and I’ve never lived or worked in New York.  What do I do to get this removed?

A.  I can totally relate to this situation.  I had a similar thing happen to me:  I live and work in Arizona and I found a Missouri state tax lien on my Equifax credit report.   The good news: I was able to remove the lien with a couple of phone calls.  The bad news: I was refinancing my mortgage and was denied due to this lien (how I found out about the error).

The first thing you need to do is find the right people with whom to make contact.  How do you find the right person/agency?  Your credit report will contain valuable information about the court or county assessor who is reporting the public record. Google the government office and get the phone number.

What information do you need to provide to the court/tax assessor to get them to look up the lien?  You should be able to merely provide your name and social security number.  If they need more information to find you, you can provide them with the reference ID number which should appear in the tax lien listing alongside the court or tax assessor.  This number will be the case or document number.

If you can’t find the information you need on your credit report  and you cannot locate the specific court, contact the New York State Office of Tax Enforcement and ask them about the lien.  Their website is www.tax.ny.gov.  They should be able to help you.

In my situation, I called the Missouri court listed on my credit report and asked to speak to the court clerk.  The woman was very nice and helpful.  She couldn’t find the tax lien using my name and social security number, but was able to find the lien under the reference number listed on my credit report.   She was able to verify that the name on the tax lien wasn’t mine, nor was the social security number.  However the address was mine and the name happened to be similar.  I explained that this tax lien had appeared on my Equifax credit report and I needed some documentation that this lien wasn’t mine.   She had to decline giving me documentation due to court policy, but she did say I could have the bureau call her and verify that the tax lien wasn’t mine.

I never wrote Equifax to dispute this listing – I decided to call them on the phone.

After navigating the automated menu system, I was able to get someone on the line.  I explained the situation, gave the clerk’s name and number and asked them to call the Missouri courthouse.  Under the Fair Credit Reporting Act, the bureau was required to perform a reasonable investigation.  By doing this, in effect, I filed a dispute on the tax lien over the phone, including as supplemental information the name and phone number of the court clerk.  Ten days later, I got a letter in the mail from Equifax with a disposition of  “removed.”  Did they actually call the courthouse?  I don’t know.

If you, as in my situation, find that your name and/or social security number do not match what’s on the tax lien, you have a few options:

  1. Push to get documentation sent to you via the mail proving the lien isn’t yours –or-
  2. Order a copy of the tax lien from the courthouse.  It is public information, so you should be able to get a copy sent to you –or-
  3. Ask the New York State Office of Tax Enforcement to notify the credit bureaus to correct the mistake.  They may be willing to do this for you.

Should you wind up with proof the lien isn’t yours, send a copy to the credit bureaus.

What if the tax lien information matches your name and SSN? Identify theft happens.  You will have to work with NY State Tax Enforcement to get the tax lien withdrawn.  A good place to start: Your year end W2s list the state where wages were earned.  You could send copies of your employer-issued W2 to the NY tax office for the year the tax lien references.  If yours only lists Nevada, it should serve as proof the tax lien should not have been filed in New York State.

If you do get the state to agree that the lien was issued erroneously, you want to push for the lien to be withdrawn, not released.  A released lien implies the lien was valid, but is now paid – still a problem for your credit report.   Released liens stay on your credit report for 7 years.   Once the lien is withdrawn, the credit bureaus should pick this up and remove the listing, but you could also send them a copy of the withdrawal.

You will most likely find that doing a simple credit dispute – merely writing the credit bureaus and asking them to remove the tax lien will not work.   Public record disputes (tax liens, bankruptcies, etc.), usually do not result getting the item removed, as the documentation used by the credit bureaus is usually pretty solid.

 


Posted in Credit Repair