With unpaid taxes, the IRS will attach a tax lien to your assets. The tax lien can be “released”; however, the history of the tax lien will cripple your credit score for seven years. A “withdrawal” will expunge it from record as if it never happened. Even after paying your full tax liability, the tax lien will negatively impact your score for seven years afterwards. I have been told by clients that a tax lien has dropped their credit score for over 100 points making it almost impossible for them to obtain a loan. For many, a better route will be a tax "withdrawal". The lien erases as if the original lien was never there. Sometimes, you can obtain this even when you have not fully paid your tax liability. Of course, certain conditions apply such as an appropriate installment agreement and good faith payments for three months.
