The 2018 Change
Before April 2018, federal tax liens appeared on your credit report and crushed your credit score. The three major credit bureaus changed their policy and stopped including tax liens on credit reports. This was a huge win for taxpayers with IRS problems.
But do not celebrate too hard. While the lien no longer appears on your credit report, it still exists in the public records. Mortgage lenders, landlords, and employers who run background checks through sources other than the three credit bureaus can still find it.
How Tax Debt Still Hurts
Even without the credit report impact, tax debt creates financial problems. The IRS can levy your bank accounts, leaving you unable to pay other bills. Missed payments on those bills destroy your credit. The IRS can garnish your wages, reducing your income and forcing you to rely on credit cards. The IRS can file a lien that prevents you from selling or refinancing your home.
The indirect damage to your credit from tax debt is often worse than the direct impact the lien used to have. When the IRS takes 70 percent of your paycheck, your mortgage, car payment, and credit cards all go delinquent.
Rebuilding After Tax Resolution
Once your tax debt is resolved, the financial recovery begins. If the IRS files a lien withdrawal, the public record is removed. If you get an installment agreement, you can rebuild credit while making payments. If you get an offer in compromise, the fresh start lets you begin rebuilding immediately.
A tax attorney resolves the IRS debt first, which removes the root cause of the credit damage. Everything else follows from there.