Doctors and IRS Tax Liens

As a Doctor you may have encountered tax problems with the IRS, leading to a tax lien reporting on your credit report. If so, you probably already know that an IRS tax lien can significantly damage your credit score, thereby hurting your ability to qualify for equipment financing to grow your practice.

A couple of years ago we worked with a client regarding the reporting of an IRS tax lien on his credit report. He was unfortunately saddled with a large and unforeseen tax liability as a consequence of his divorce proceedings.

Following his divorce, the IRS filed a tax lien against him. The lien was then reported by the credit bureaus on his credit reports. So in order to pay the income tax liability, he attempted to get a personal loan from his bank. However, his bank wouldn't approve the loan because of the tax lien showing on his credit reports.

He contacted the IRS and requested a withdrawal of the tax lien to allow him to get a loan to pay the tax liability. However, the IRS agent said they would temporarily withdraw the tax lien only if he could show proof that he had an approved loan. But, the bank wouldn't approve the loan unless the tax lien was withdrawn and removed from his credit report. So around and around he went. Dealing with IRS tax liens can be tricky business. Typically, IRS tax liens can be legally reported on your credit report for up to 7 years from the date of last activity. So if you wait 4 years to repay the tax lien, it can be reported on your credit report for another 7 years after repayment, totaling 11 years.

In some cases, even after repaying the lien, the "release of lien" itself may be filed as a public record and can have a negative impact on your credit scores. So it's important to take the necessary steps to get all lien information legally removed from your credit report. Prior to February 24, 2011 an IRS tax lien was very difficult to get legally removed from your credit report.

However, it seems the IRS has turned over a new leaf. On February 24, 2011 the IRS announced major changes to their tax lien process to help struggling tax payers to get a fresh start. This is good news for many Doctors. These new changes include:

  • Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.
  • Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.
  • Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.
  • Creating easier access to Installment Agreements for more struggling small businesses.
  • Expanding a streamlined Offer in Compromise program to cover more taxpayers.

One of the major benefits of the new changes is that many taxpayers can now get a withdrawal of their tax liens approved by simply entering into a direct debit installment agreement for the delinquent tax liability. That's right. The tax lien can be withdrawn BEFORE the delinquent tax liability is actually paid off.

Also, the IRS is incorporating an accelerated process for getting the tax liens withdrawn. The key is you have to actually request the withdrawal of the tax lien by filing a request for withdrawal of the tax lien form after you enter into the direct debit installment agreement.

Once the withdrawal of tax lien is approved, all you have to do is draft a credit dispute letter to the credit bureaus and attach a copy of the IRS tax lien withdrawal notice to get the tax lien legally removed from your credit reports.

Contact us today to schedule a credit check up!

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