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Tax Liens On Background Checks: What You Need To Know

An illustration showing tax lien background check results.

Employment background checks can reveal different results based on the type of screening you use. In some industries, and for certain positions, you may need to run a more comprehensive background search to learn whether candidates have a tax lien on their record.

Let’s take a closer look at what that means, and which type of screening you would use.

An Overview Of Tax Liens

At a high level, a federal tax lien is issued when a person neglects or fails to pay taxes or outstanding tax debt. The lien itself is the government’s legal claim against your property, including personal property, real estate, and financial assets. 

Once the government alerts someone to their balance due—and the person doesn’t pay it in full on time—the lien is filed as a public document, alerting creditors that the government has legal rights to your property. 

Liens can impact a person’s situation—and their financial health—in multiple ways. In addition to claiming rights to their property, liens can also make it more difficult for someone to secure credit. Liens are also attached to a person’s existing business assets, including property and accounts receivable. Finally, if a person files for bankruptcy, the lien and the debt owed can remain in place even after the bankruptcy is discharged.

Tax Liens On Credit Reports

In April 2018, the Consumer Financial Protection Bureau and the National Consumer Assistance Plan lobbied the top three credit bureaus—Equifax, Experian, and Transunion—to stop including tax liens on credit reports. Why? 

The reported information was often inaccurate—which goes against the requirements of the Fair Credit Reporting Act (FCRA). As a result, the bureaus agreed to stop reporting civil judgments and tax liens on consumers’ credit reports. However, before that, a tax lien could lower a person’s credit score upward of 200+ points.

Today, if a consumer notices a former lien on their report (that they have already paid off), they can contact each bureau to get it removed. However, even though tax liens are no longer on credit reports, information about the liens can still be accessed by credit card companies, lenders, landlords considering a lease, and employers using a Consumer Reporting Agency (CRA) to screen candidates for jobs.

Tax Liens On Civil Court Background Checks

Candidates may ask, “Will an employer background check find a tax lien?” While tax liens are no longer reported on credit reports, employers can still discover whether a candidate has a tax lien against them or their property. That’s because tax liens are public record—which means they’re discoverable through specific background check searches called Civil Court Background Checks.

As an employer, you can use either a Lower Civil Court Check or Upper Civil Court Check—both of which are a type of Civil Court Background Check—to discover whether a candidate has a lien on their record. 

These screenings search state-level lower and upper civil court records (typically up to three counties) for claims and disputes—including tax liens. They can also reveal information including:

  • Civil disputes
  • Foreclosures 
  • Debt collections, and 
  • Civil domestic violence

Both lower and upper civil court checks typically go back seven years. Some exceptions are made if a candidate’s salary will be $75,000 or more. In these instances, the search may extend back 10 years. However, in California, New Mexico, Massachusetts, and Montana, searches are limited to seven years.

How Candidates Can Remove Tax Liens 

Because tax liens have a significant impact on a person, there are a few options available to get them off their public record. However, some options are more difficult than others and require lengthy (and sometimes costly) processes. 

Here’s a quick breakdown of options for how someone can remove a tax lien:

  • Paying back tax debt:  Liens are released 30 days after debts are paid off—whether it’s paid in full or through payment plans that collect interest.
  • Discharge of property: This removes the lien from specific property.
  • Withdrawal: This removes the public Notice of the Federal Tax Lien and ensures the IRS doesn’t compete with other creditors for your property. With this option, though, the person is liable for what they owe.
  • Subordination: This option doesn’t actually remove the lien; it just allows other creditors to move ahead of the IRS. That way, the person with the lien can have a better chance at securing a loan or mortgage.
  • Compromise: Just as the name states, this option allows a person to come to a compromise with the Federal Government about the amount owed, when it’s due, and how it will be paid.
  • File an appeal: If a person disagrees with the IRS’s decision regarding a lien, they can request an appeal through a written protest. 
  • File for bankruptcy: If it’s determined a person cannot pay their tax debt—they have the option to file for bankruptcy. However, this option doesn’t guarantee that a person can have their tax debt discharged.

Conduct Accurate & Compliant Civil Court Background Checks Through GoodHire

To hire the most qualified candidates, you’ll want to gather as much relevant information as necessary as it pertains to the position through a comprehensive background check

For positions that require the handling or management of finances and assets, Civil Court Background Checks can be helpful during the screening and hiring process. That’s because they can reveal information about a candidate’s own financial responsibility and handling of money, which may help determine whether they’re qualified to work for your organization. 

Beyond that, conducting Civil Court Background Checks helps companies continue to safeguard assets, comply with industry regulations, and follow company screening and hiring policies.

At GoodHire, our advanced platform and trained experts help you adhere to federal, state, and local laws to maintain compliance throughout the screening process. That includes navigating screening results, as well as following adverse action steps as set forth by the FCRA

You’ll get peace of mind knowing you’re making the most informed hiring decisions based on accurate, up-to-date records.

GoodHire offers hundreds of screening options, including Upper & Lower Civil Court Checks, Federal Court Checks, and Federal Bankruptcy Checks.

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The resources provided here are for educational purposes only and do not constitute legal advice. We advise you to consult your own counsel if you have legal questions related to your specific practices and compliance with applicable laws.

About the Author

Ashley Blonquist is a former news journalist. She writes about GoodHire’s employment screening services and how employers use them to make informed hiring decisions.