How Do Tax Liens Impact Your Credit Report and What Are the Steps to Request a Withdrawal?

A tax lien is a public notice that a government body (federal or state) has a legal claim against your assets because you owe unpaid taxes. The immediate effect on your credit and finances depends on how the lien is recorded and whether major credit reporting agencies have the lien on file.

Important context (what has changed since 2018)

  • Major national credit bureaus stopped routinely including many civil judgments and tax liens on credit reports after data-quality concerns surfaced in 2017–2018. That means many people do not see a tax lien as a line item on their Equifax, Experian, or TransUnion reports today, but lenders and title companies still search public records and will find a Notice of Federal Tax Lien (NFTL) or state tax liens through county recorder offices. (See CFPB and IRS guidance on public-record items and tax liens.) CFPB: What is a tax lien? • IRS: Notice of Federal Tax Lien

What a lien actually does to your credit and financing options

  • Lenders and underwriters who do manual or public-record checks will treat a lien as a serious red flag. Mortgage underwriters, real estate title companies, and business lenders often require liens be resolved before closing or financing.
  • If a lien is reported to the credit bureaus (or appears in a public-record data product used by lenders), it can materially hurt your credit score and perceived creditworthiness. The score impact varies by scoring model and the rest of your profile; some people experience large drops while others see smaller changes.
  • Even after you pay the tax debt, the lien remains on public record until it’s released or withdrawn. A release or withdrawal is a separate administrative action and can affect how quickly lenders see the lien as resolved.

Federal vs. state liens: different rules, different effects

  • Federal tax liens are filed by the IRS as a Notice of Federal Tax Lien (NFTL) and appear in county public records. State tax liens are filed by state tax authorities and follow state recording and withdrawal processes. Both can interfere with sales, refinances, and approvals.

Practical steps to confirm a lien and measure the damage

  1. Pull your credit reports from the three major bureaus at AnnualCreditReport.com and look for public-record items.
  2. Search the county recorder/clerks’ office where your property is located for any recorded lien documents.
  3. Request a tax transcript or account transcript from the IRS (or your state tax authority) to confirm the underlying balance, dates, and whether an NFTL has been filed.
  4. Ask potential lenders or title companies what they found and whether they require release or withdrawal before closing.

How to request a withdrawal of a Notice of Federal Tax Lien (overview)
The IRS can withdraw a filed Notice of Federal Tax Lien under certain circumstances. Withdrawal is stronger than a release: a withdrawal treats the lien as if it had never been filed, which helps when clearing title concerns or addressing credit reporting issues. The IRS describes withdrawal criteria and procedures on its site. IRS: Notice of Federal Tax Lien

Common pathways to withdrawal or removal

  • Full payment: If you pay the tax debt in full and the IRS records issuance of the Certificate of Release, you can then ask the IRS to withdraw the NFTL if the filing met withdrawal criteria.
  • Qualifying installment agreement: Under the IRS Fresh Start program, the IRS may withdraw a lien if you enter into a qualifying Direct Debit Installment Agreement (DDIA) or other qualifying agreement and meet the program’s conditions.
  • Filing error / administrative reasons: If the NFTL was filed in error or was legally incorrect, the IRS will withdraw the notice.
  • Offer in Compromise or other settlement: When an OIC or other negotiated settlement satisfies the conditions for withdrawal, the IRS may withdraw the recorded notice.

Step-by-step guide to requesting withdrawal (practical checklist)

  1. Gather documentation
  • Obtain a copy of the lien filing from the county recorder or from the taxpayer’s IRS account transcript.
  • Collect proof of payment, installment agreement acknowledgment, or settlement letter.
  • Get tax transcripts showing account balance and payment history using the IRS Get Transcript tool or by contacting the IRS.
  1. Verify eligibility
  • Read the IRS criteria for withdrawal (IRS withdrawal policies are available on the IRS website). If you entered a qualifying Direct Debit Installment Agreement or paid in full, you may meet the criteria.
  1. Submit a written request
  • Send a written request for withdrawal to the IRS office that filed the NFTL (the local IRS office or address listed on the recorded notice). Include a clear statement of the tax periods involved, the lien document number (from the county recorder), proof of payment / agreement, and a daytime contact number.
  1. Follow up with the county recorder
  • After the IRS issues a withdrawal, confirm that the IRS has filed the withdrawal with the county recorder’s office. Public records should show the withdrawal notation.
  1. Confirm with lenders and credit reporting sources
  • Provide lenders or title companies with the withdrawal or release documentation. If the lien had been reported to a credit bureau, obtain an updated credit report and file disputes for inaccurate or uncleared items as needed.
  1. Escalate when necessary
  • If the IRS delays or denies withdrawal, consider contacting the IRS Office of Appeals, the Taxpayer Advocate Service, or a tax attorney to dispute the decision. The Taxpayer Advocate Service can help when delays create a significant hardship. Taxpayer Advocate Service

Timeframe and what to expect

  • Processing times vary. After the IRS approves a withdrawal, it must record that withdrawal with the county recorder; that step can take a few weeks. Lenders and credit platforms may need additional proof or time to update their records. Expect anywhere from several weeks to a few months in many cases.

Common mistakes and how to avoid them

  • Assuming payment alone clears everything: Paying the tax does not automatically remove the NFTL from public record — you must get a release or request withdrawal.
  • Not confirming who filed the lien: Sometimes private tax preparer errors or identity mix-ups lead to incorrect filings. Always verify the exact document and filing location.
  • Failing to document communications: Keep copies of all requests, receipts, and IRS correspondence; this speeds resolution with lenders and title companies.

What I’ve seen in practice
In my practice helping clients, the fastest wins come when a taxpayer: (a) confirms the lien and balance quickly, (b) negotiates a qualifying installment agreement or pays the balance, and (c) asks the IRS for withdrawal while simultaneously providing the county recorder and prospective lenders with copies of the withdrawal/release. In one case, getting a withdrawal recorded reduced friction in a mortgage closing that had stalled for weeks.

When withdrawal may not be available

  • If the lien was filed correctly and the taxpayer’s situation doesn’t match the IRS’s withdrawal criteria, a withdrawal may be denied. The IRS may still issue a Certificate of Release once the liability is satisfied. A release confirms the liability is paid but does not erase the fact that a lien was filed.

Checking outcomes and repairing credit

  • After withdrawal or release, obtain written confirmation and copies of the recorded withdrawal from the county recorder. Then:
  • Order fresh credit reports and verify that public-record lines are corrected.
  • If the lien still appears on a credit report, file a dispute with the credit bureau attaching the withdrawal/release documentation.
  • Provide the lender or title company with recorded withdrawal documentation and explain their reporting obligations.

Helpful resources and internal guides

Authoritative references

Professional disclaimer
This article is educational and reflects general procedures current as of 2025. It is not individualized legal, tax, or financial advice. Tax lien processes and eligibility rules change; consult a qualified tax attorney, CPA, or the IRS for guidance specific to your case. If you face immediate hardship from a lien, consider contacting the Taxpayer Advocate Service for assistance.

Next steps (quick checklist)

  • Confirm the lien via county records and tax transcripts.
  • Negotiate payment or a qualifying installment agreement with the IRS/state.
  • Request a formal withdrawal or release in writing and get recorded confirmation.
  • Provide withdrawal/release proof to lenders, title companies, and credit bureaus and dispute lingering reporting errors.

Resolving a tax lien takes organization and persistence, but with the right documentation and timely requests you can clear title issues and reduce the lien’s effect on borrowing and real estate transactions.