How to dispute a tax lien
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Contact the collections department of your state's Department of Revenue. Their website should instruct you on how to file for an administrative review. Provide them with the amount of the lien, an explanation of the error, your name, your contact details and your Social Security number. Also provide evidence to back up your claim--a canceled check, court papers proving that you have filed for bankruptcy, or a copy of your state tax returns. This will likely have to be done via a signed document sent by surface mail, not by email.
Assuming that your administrative review was unsuccessful, contact the major credit bureaus--Equifax, Experian and TransUnion--to dispute the lien. Include a copy of your credit report and your contact details, along with a signed, notarized letter demanding removal of their recording of the lien. Send the letter by registered mail, return receipt requested. Although they may not remove the lien from their records, they will note that the debt is in dispute, which should mitigate damage to your credit rating while the issue is being resolved.
File an action to quiet title (or its equivalent in your state), naming the state Department of Revenue and seeking removal of the tax lien from any of your property to which it is attached.
Include in your complaint the alleged taxes, fees and penalties that underlie the tax lien; the date and place that the Notice of Tax Lien was filed against your property; and your explanation of why the lien was filed in error, together with copies of any documentary evidence (see Step 1). This complaint should be filed in the state District Court in which the property is located or registered. If you own the property subject to the tax lien, you should have standing to file this lawsuit, even if the underlying tax debt was originally assessed against the previous owner.
Negotiate with the state Department of Revenue for voluntary removal of the lien while your case is pending. If you have a strong case, the state government will probably prefer to remove the tax lien rather than pursue a case that it probably won't win. Include in your settlement demands a settlement agreement signed and notarized by the appropriate state-government official. This document will expedite the removal of the lien from your credit record.
Notify the major credit bureaus of the outcome of your lawsuit if it is favorable to you, and mail them documentary evidence (a copy of the settlement agreement or judgment). They will then be obligated to remove the tax lien from your credit report.Source: ehow.com