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TAX LIENS
Settle, Remove and Improve Your Credit

Seems to be one of the most talked about topics. How to settle taxes, remove them from your credit reports and generally rid yourself of the whole unpleasant experience. We'll cover it all and hopefully you'll be moving on in no time to less tax debt and better credit plus peace of mind!

How To Settle Back Taxes
The IRS often accepts OIC (offer in compromise) for taxes, especially if you show undo hardship and inability to pay your taxes. You should find a qualified tax attorney to help you with a situation this serious to make sure you get the best offer. Many attorneys specialize in tax law and can cut your tax debt in half using their negotiation skills. These attorneys and tax professionals know what to look for and avoid big mistakes like paying off a tax debt that is nearing the statute of limitation. Big mistake! I am quite impressed with CTC tax attorneys. Very reputable, may be a little bit more expensive but this is where you get what you pay for. You can also search for a tax specialist using our custom LawInfo search.

Finally, according to the IRS, offer and compromises are very doable- they're done everyday and here is a little of what the IRS considers: Generally, we approve an Offer in Compromise when the amount offered represents the most we can expect to collect within a reasonable period of time. Although each case is evaluated based on its own unique set of facts and circumstances, we give the following factors strong consideration in the evaluation:

The taxpayer's ability to pay
The amount of equity in the taxpayer's assets
The taxpayer's present and future income
The taxpayer's present and future expenses
The potential for changed circumstances ]

The IRS Code states: "We will accept an Offer in Compromise when it is unlikely that we can collect the full amount owed and the amount you offer reasonably reflects the collection potential." Internal Revenue Code, section 7122.

Statute of limitations on tax liens (collectability)
The statute of limitations under which a Federal tax lien may become "unenforceable by reason of lapse of time" is found at 26 U.S.C. § 6502. For taxes assessed on or after November 6, 1990, the lien generally becomes unenforceable ten years after the date of assessment. For taxes assessed on or before November 5, 1990, a prior version of section 6502 provides for a limitations period of six years after the date of assessment. Various exceptions may extend the time periods.

Release of Federal tax lien
In order to have the record of a lien released a taxpayer must obtain a Release of the Notice of Federal Tax Lien. Generally, the IRS will not issue a notice of release of lien until the tax has either been paid in full or the IRS no longer has a legal interest in collecting the tax. The IRS has standardized procedures for lien releases, discharges and subordination. In situations that qualify for the removal of a lien, the IRS will generally remove the lien within 30 days and the taxpayer may receive a copy of the Certificate of Release of Federal Tax Lien.

Offer in compromise on the tax lien
A properly submitted offer in compromise does not affect a tax lien, which remains effective until the offer is accepted and the offered amount is fully paid. Once the compromised amount is paid, the taxpayer should request removal of the lien. Normally the lien may just appear on your credit reports as "satisfied" but you want to shoot for removal in your offer and compromise. It's a long shot because the IRS usually doesn't negotiate tax liens but it's done. Especially if the credit bureaus are unable to confirm it at your request.

Improving Your Credit
The ugly truth: Tax liens remain on your credit reports for 7 years from date satisfied not filed. If they remain unpaid they can stay longer, however they are only collectable for 6 to 10 years with some provisions see above for more. Once a tax lien hits your credit reports you are in serious trouble. Not only do you have the IRS after you but now the lien has been recorded against your credit reports for the whole world to see everytime you apply for credit. While the IRS is not known for negotiating credit ratings there is a way to ensure maximum results.

First, you will want to determine that you do in deed owe the taxes that are listed on your credit reports. You'd be surprised how many credit reports have inaccurate ratings. If you have the documentation from the IRS about how much you owe then send off a request to the credit bureaus to validate the lien that's listed. The credit bureaus will begin an investigation wherein they'll send a request out to verify the tax lien. If it's unverifiable it will be removed- end of story. If it's reinserted by the IRS, you must be notified within 5 days of the reinsertion along with a valid reason why. If it is verified as accurate by the IRS to the credit bureaus then you need to decide how you'll go about paying it. Will you simply pay it in full, will you ask for an abatement, will you use a tax negotiator? These are all questions that only you know the answer to.

Once it's settled, paid dismissed etc., you then need to wait about 3 to 6 months and send another request to the credit bureaus to verify it. Chances are now that the IRS has been paid they won't even bother responding to the bureaus request and instead of being listed as "paid tax lien" it may be removed. On the other hand if you do not owe the tax lien and you have proof then you need to send the proof to the credit bureaus and the IRS and ask that it be dismissed. You should not have to deal with a negative tax lien if you never owed it to begin with. There are three ways a lien is listed;

-Paid tax lien (you simply paid it)
-Settled tax lien (you settled it and the IRS reported it as such)
-Dismissed tax lien (the IRS found reason it was invalid)

You need to determine which fits your situation but remember you do not have to settle for a "dismissed rating" if the darn thing was a mistake to begin with. Demand it be completely removed. If you owe state or federal taxes, you need to resolve them otherwise you risk a levy or lien against you your home or property.

Can taxes be included in a bankruptcy filing?
According to Doney.net, In order for tax to be discharged ALL of the following must be met:

-Returns on which the tax is based must be due more than 3 years before the filing of the bankruptcy;

Note: Income tax returns are usually due on the April 15 following the end of the tax year, but can be due later if the 15th falls on a weekend, or if the due date was extended.

-Returns must have been filed more than 2 year before the bankruptcy is filed; (Unfiled returns are not dischargeable in Chapter 7, but may be in Chapter 13.)

-If the tax is from an assessment, must be assessed more than 240 days before bankruptcy is filed.

-941 withholding tax on employees cannot be discharged.

-A Chapter 13 plan must pay any tax which is not discharged.

Some portions of research are wiki'd.