At its core, a federal tax lien occurs when a person doesn’t pay their taxes or outstanding tax debt. It’s the government’s way of legally claiming your property, which includes personal belongings, real estate, and financial assets.
When the government notifies someone of their unpaid balance and they fail to pay it in full on time, the lien becomes a public document. This notifies creditors that the government has rights to the person’s property.
Liens can affect a person’s situation and financial well-being in various ways. Besides asserting rights to their property, liens can also make it tougher to obtain credit. They’re also tied to a person’s business assets, such as property and accounts receivable. Moreover, if someone declares bankruptcy, the lien and the debt owed can persist even after the bankruptcy process is completed.
Tax Liens On Credit Reports
In April 2018, the Consumer Financial Protection Bureau and the National Consumer Assistance Plan urged the three major credit bureaus—Equifax, Experian, and Transunion—to halt the inclusion of tax liens on credit reports. The reason?
Reported information about tax liens often proved to be inaccurate, violating the Fair Credit Reporting Act (FCRA). Consequently, the bureaus agreed to cease reporting civil judgments and tax liens on consumers’ credit reports. Yet, before this change, a tax lien could significantly lower a person’s credit score by over 200 points.
Today, if consumers spot a previous lien on their report (that they’ve already settled), they can reach out to each bureau to have it removed. However, although tax liens no longer appear on credit reports, details about them remain accessible to credit card companies, lenders, landlords vetting lease applicants, and employers using Consumer Reporting Agencies (CRAs) for job candidate screenings.
Tax Liens On Civil Court Background Checks
Candidates might wonder, “Will an employer background check uncover a tax lien?” Even though tax liens don’t show up on credit reports anymore, employers can still find out if a candidate has a tax lien against them or their property. That’s because tax liens are part of public records, which means they’re accessible through specific background check searches known as Civil Court Background Checks.
As an employer, you can opt for either a Lower Civil Court Check or an Upper Civil Court Check, both falling under the umbrella of Civil Court Background Checks. These searches delve into state-level lower and upper civil court records, typically spanning up to three counties, to uncover claims and disputes, including tax liens. They may also reveal other details such as civil disputes, foreclosures, debt collections, and civil domestic violence cases.
Generally, both lower and upper civil court checks over the past seven years. However, exceptions are made if a candidate’s salary will exceed $75,000. In such cases, the search might extend back 10 years. Yet, in California, New Mexico, Massachusetts, and Montana, searches are typically limited to seven years.
How Candidates Can Remove Tax Liens
Because tax liens carry significant implications for individuals, there are several avenues available to remove them from public records. However, some routes are more challenging and entail lengthy (and sometimes costly) processes.
Here’s a quick rundown of options for removing a tax lien:
Paying back tax debt: Liens are typically released 30 days after debts are fully paid off, whether through full payment or installment plans with accruing interest.
Discharge of property: This option removes the lien from specific properties.
Withdrawal: By withdrawing, the individual removes the public Notice of the Federal Tax Lien, ensuring that the IRS doesn’t compete with other creditors for their property. However, the person remains liable for the owed amount.
Subordination: This option doesn’t erase the lien but allows other creditors to take precedence over the IRS, improving the individual’s chances of securing loans or mortgages.
Compromise: As the name suggests, this option involves reaching a compromise with the Federal Government regarding the owed amount, payment schedule, and terms.
Filing an appeal: If someone disagrees with the IRS’s decision regarding a lien, they can request an appeal through a written protest.
Filing for bankruptcy: If an individual is unable to repay their tax debt, they have the option to file for bankruptcy. However, this doesn’t guarantee the discharge of the tax debt.
Conduct Accurate & Compliant Civil Court Background Checks Through GoodHire
To hire the most qualified candidates, you’ll want to gather all the relevant information necessary for the position through a comprehensive background check.
For roles involving finances and asset management, Civil Court Background Checks can be invaluable. They shed light on a candidate’s financial responsibility and money management skills, helping you gauge their suitability for your organization.
Moreover, conducting Civil Court Background Checks allows companies to protect assets, meet industry regulations, and adhere to internal screening and hiring protocols.
At GoodHire, our advanced platform and trained experts ensure compliance with federal, state, and local laws throughout the screening process. We guide you through screening results and follow adverse action procedures outlined by the FCRA.
With GoodHire, you’ll have peace of mind knowing you’re making informed hiring decisions based on accurate, up-to-date records.
We offer a wide range of screening options, including Upper & Lower Civil Court Checks, Federal Court Checks, and Federal Bankruptcy Checks.