I have a federal tax lien and I wish I would have checked out the site 2 days ago. I just sent off via a web bill pay from my bank to the IRS for the balance. After research I found out about form 12277 Application for Withdrawal of Filed Federal Tax Lien. It appears you can request your lien be removed because it woudl raise your credit score then you could get a loan to pay it off meaning it will help facilitate the collection of the tax. Well I am trying to decide what to do. I tried to stop by bank sending out the check but it went out today. I could stop payment on it but I think that could be bad. I am planning on sending in the request but I am not sure if I should include a letter and if so what? Am I totally screwed if I just let the check clear and then the lien will be on by CR for another 7 years? I am kicking myself for not researching this before sending in $15K to them. Any help or advice would be greatly appreciated. I have some other derogs I am working on next. -Desperado
It would be a VERY, VERY BAD thing to stop payment on a check to the IRS without a VALID reason. File the form anyway.
In addition, paying the lien is not necessarily a bad thing. At the very least, its satisfaction now eliminates it from the realm of a potential encumbrance and places that road block out of the way in the event you are entertaining the notion of a mortgage.
Thanks for the feedback. I will continue with the payment and hope my letter gets there fast and I get lucky. I am planning on refinancing my mortgage as soon as I can get my score to where I can get a good rate. Right now I am at 625 with the lien and 13 old TL late payments all of which are at least 2 years old.
Regardless of the above; the important thing to follow up on is the "Release of Federal Tax Lien". Make sure this lien gets released, then make sure your credit reports show this lien as paid, and released. It is probably too late to request a withdrawal; the process is long and involved, so a call or letter will probably not do it. You can still "try" to request a Withdrawal; you could make a possible case of needing to refinance to "pay back this amount" paid to the IRS. But, usually, once the lien and tax is paid, they do not withdraw.
I definitely was kicking myself for not waiting a couple of days and reading the board before I sent out a $15K check. Oh well live and learn at least it will be paid. Dumb question I am sure but I am assuming my score should go up once the liens have been released? I will still try the withdrawal and hold out little hope. My main objective right now is to refinance an ARM by next February.
Your score may go up, due to less debt showing on your report, and hence less "utilization". But, the tradeline of a tax lien will still show, and a lien is a major negative as far as a credit score. So, do not expect a major increase just because it's paid now. I know this is painful to hear, but the best time to negotiate withdrawal is before paying (this is straight from the IRS). At least you have this behind you, as far as the liability. Lastly, I would still try for the withdrawal request, you never know, you might get some luck.
