How to Remove A Paid Tax Lien from Your Credit Report

A federal Tax Lien is the federal government's legal claim against your property when you neglect or fail or fail to pay a tax debt. Unpaid tax liens can have a devastating affect upon your credit score.  Even if you have paid the lien, it still shows up on your credit report and has a negative effect on your FICO score.  It also affects your ability to obtain new credit. Unless the IRS files a lien notice, no one knows about the lien except you and the IRS.

This article will show you the steps to take to remove a paid tax lien from your credit report.  

When you owe money to the IRS, they file a public document called a Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.  Every creditor with whom you apply for credit will see it on your credit report.  Depending upon the amount, tax liens have about the same impact on your FICO score as a mortgage foreclosure.  If you have paid the tax lien here are the steps to have it removed from your credit report.

In 2011 the IRS initiated a program called the Fresh Start Initiative. This program allows the tax payer to have the lien "Withdrawn" from public notice, meaning the IRS will remove the Notice of Federal Tax Lien document they filed internally and with the courts that you owe them money. It also allowed the tax payer to have the notice removed from their credit report. This does not, however, mean that the lien has been satisfied, or "released." The only way a tax lien can be released is if it is paid in full or the time to collect it has expired.



Documents you will need to file with the IRS:

• IRS Form 12277 (Application for Withdrawal of Notice of Federal Tax Lien)
• IRS Form 668(y) Notice of Federal Tax Lien
• IRS Form 668(z) Certificate of Release of Federal Tax Lien

If you do not have your Certificate of Release of Federal Tax Lien, click here to access instructions on how to request it. 

You will need the information on form 668(y) in order to properly complete form 12277.  On form 12277 you shouldn't have a problem completing lines 1-9 using the information from your form 668(y). On line 10, "Current Status of Tax Lien" make sure you check the box that indicates the lien has been released. On line 11, "Reason for Request Withdrawal of Federal Tax Lien" you must check the box that indicates Tax payer, or the Tax Payer Advocate acting on behalf of Taxpayer believes Withdrawal is in the best interest of the Taxpayer and the Government. On Line 12 you must give an explanation for the withdrawal request. In this section you must write, "As per the fresh-start program, I am requesting that this lien be withdrawn.  Once reviewed and approved, please forward copies of the withdrawal notice to:"

Equifax Information Services, Inc.
P.O. Box 740214
Atlanta, GA 30374

Transunion Consumer Solutions
P.O. Box 2000
Chester, PA 19022-2000

Experian
P.O. Box 4500
Allen, TX 7501

Submitting your documents to the IRS

When you have completed form 12277 you will need to send it to the correct IRS office or their response could be delayed. You will find the information on your form 668(y). Form 668(y) will have the address of the IRS office that filed your Notice of Federal Tax Lien.  This location varies depending upon the state you lived in when the tax lien was originally filed. If you do not have that information, get a copy of IRS Publication 4235. It has the contact information for the IRS Collection Advisory Group for the state where your lien was filed. If you call them they can tell you to which IRS office you should submit your documents. 

Contact the credit bureaus

When you receive a response from the IRS (if it is positive) send that as an attachment with a letter to all three credit bureaus requesting the notation of the lien be removed. 

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States should ban credit checks on job applicants

Re-blogged from Februrary 2013
Technorati Tags: credit report,employment credit check


Let’s face it, our economy is still in the crapper. The latest statistics from US Department of Labor and Industries says the national unemployment rate is still hovering around 8.1%. However, the real
unemployment picture is much more discouraging. Here is an excerpt from an article I read today; Jeff Cox, a reporter at CNBC.com wrote:

“While the national unemployment rate paints a grim picture, a look at individual states and their so-called real jobless rates becomes even more troubling. The government's most widely publicized unemployment rate measures only those who are out of a job and currently looking for work. It does not count discouraged potential employees who have quit looking, nor those who are underemployed — wanting to work full-time but forced to work part-time. For that count, the government releases a separate number called the "U-6," which provides a more complete tally of how many people really are out of work.”

The numbers in some cases are startling.
Consider: Nevada's U-6 rate is 22.1 percent, up from just 7.6 percent in 2007. Economically troubled California has a 20.3 percent real rate, while Rhode Island is at 18.3 percent, more than double its 8.3 percent rate in 2007.
Those numbers compare especially unfavorably to the national rate, high in itself at 14.9 percent though off its record peak of 17.2 percent in October 2009.
Only three states — Nebraska (9.1 percent), South Dakota (8.6 percent) and North Dakota (6.1 percent) — have U-6 rates under 10 percent, according to research from RBC Capital Markets.”

In these hard times, as a country, this is definitely not the time to add to the difficulties of finding work. We should be trying to remove barriers to finding work, not reinforce them. A few forward-thinking legislators are doing just that – removing barriers. In four states, legislators have created laws to limit pre-employment credit checks. Those states are Hawaii, Washington State, Oregon, and Illinois.

The laws preventing a company from making a hiring decision based upon a potential employee’s credit history have some limitations, however. For example, if a person applies for a job where he or she has to handle money like at a bank, or at an investment firm, the law still permits the employer to consider issues like theft, or fraud convictions. Sixty percent of employers recently surveyed by the Society for Human
Resources Management said they run credit checks on at least some job applicants. That compares with 42 percent in a similar poll in 2006. Employers say credit checks give them valuable information about an applicant’s honesty and sense of responsibility. But lawmakers in Missouri and at least 15 other states have proposed outlawing most credit checks, saying the practice traps people in debt because their past problems could prevent them from finding work. Under federal law, a prospective employer must get written permission from an applicant to run a credit check, but consumer advocates say most applicants feel they are in no position to refuse. Most of the bills proposed this year resemble laws in Hawaii and Washington that prevent employers from using credit reports when hiring for most positions.

On a national level, Rep. Steve Cohen, a Tennessee Democrat, introduced a similar bill last summer in the U.S. House, where it is still in committee. More companies use credit checks, but only 13 percent perform them on all potential hires, according to the most recent survey by the Society for Human Resources Management. Mike Aitken, the group director of government affairs, said a blanket ban could remove a tool employers can use to help them make good hiring decisions. Aitken cited a 2008 survey by the Association of Certified Fraud Examiners that found the two most common red flags for employees who commit workplace fraud are living beyond their means and having difficulty meeting financial obligations. The same survey estimated that American companies lost $994 billion to workplace fraud in 2008. Aitken said someone who cannot pay his bills on time may not be more likely to steal but might not have the sense of responsibility to handle a job like processing payroll checks.

While it might be tough to argue against statistics- not impossible, but tough – those statistics do not account for issues like race discrimination. It is a known fact that racial minorities, especially African Americans, tend to have more credit problems than their white counterparts as a result of higher rates of unemployment. And what about CEO’s who commit acts of dishonesty and leave the company with a golden parachute amounting to millions of dollars? Just this past Friday CEO Russell Wasendorf, SR. of PFGBest, one of the industries 10 largest brokerage firms, tried to commit suicide after leaving a note confessing to 20 years of fraud and forgery. The MSNBC.com article stated:

“In the dramatic conclusion to a week-long saga that has shaken trader confidence in the trillion-dollar U.S. futures markets, authorities released parts of a detailed statement in which one of the industry's best-known veterans explained how he used little more than a rented P.O. Box, Photoshop and inkjet printers to dupe regulators in a more than $100 million scheme.”

I wonder what Mr. Wassendorf’s FICO score is? I do not doubt that there are others out there like him who tout amazing FICO scores, have a great credit rating, and are getting away with similar acts of fraud and dishonesty. This is proof positive that a FICO score is no real indication of the content of a person’s character. And as for Mr. Aitken’s assertion regarding workplace fraud, just ask yourself: how many people do I know who live beyond their means, and have some trouble meeting their financial obligations? The honest answer is almost everyone. Not because they are irresponsible, but more because the cost of living has out-paced the average living –wage position. So does that mean almost everyone is dishonest or would commit fraud? Certainly not. I am not saying that financial pressures cannot cause a person to commit workplace fraud, but I am saying that the decision will more often come down to that person’s sense of morality no matter how intense the pressure. If committing an act of fraud was simply a function of a person’s financial condition and no other factors were relevant, our prison’s would not be able to hold all of the criminals that would be sent there. Yet, when a person applies to a job for which they are qualified, sometimes the only other relevant factor upon which they are hired or not, is their credit rating. I have personally experienced this occurrence myself so I know it’s true.

Employers who make hiring decisions based upon an applicant's credit report

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Are they judging you based upon your credit score?

Have you ever applied for a job, got to the second interview, had the discussion about salary and benefits, had a really good feeling about getting the position, only to have the wind knocked out of your sails because the employer needs to check your credit report?  Several months ago, a close friend of mine applied for a position with the US Department of Justice's local Seattle office and after the first interview, she was denied further consideration because of the information they found on her credit report.  They told her (in so many words) that the reason they require a clean credit history is because people who have bad debt can somehow be tempted to do unethical things on the job.  In other words, the content of a person's character is a direct result of their financial condition.  I could not disagree more with this flawed logic. But more on that topic later..

My friend has been unemployed for 8 consecutive months, haven't found full time work in almost 3 years, and has applied either in person or online to over 700 jobs with no success.  I'm telling you her story because my still employed friends keep telling her that many people are in the same position as she is; their unemployment benefits have run out, their home has been foreclosed, and things have reached a critical level financially. 

It truly amazes me how many peoples lives have been utterly and completely devastated by the economic recession and home foreclosure crisis.  We have all heard about how the home foreclosure crisis happened, who's to blame, and what the president is trying to do to help a fraction of those people who didn't loose their home, fight to keep it.  What about the people who must rebuild their lives from nothing because of not being able to pay their bills for all this time?  How will they survive a credit check if they haven't been able to pay their bill at all, let alone in a timely manner?

According to the US Bureau of Labor Statistics, the national unemployment rate is 8.3%.  Nationally, That percentage converts to about 26 million people.  And that's not to mention what economists call the real unemployment rate that includes people who have been forced to take part-time jobs, or seasonal positions, or those who are working jobs that pay way below a living wage, or people who have stopped looking for work altogether.  Those economists say the real unemployment rate is somewhere between 17-20 %!  In my home state of Washington (not the District of Columbia) the unemployment rate is 8.7%, just above the National average.   

In recent years, employers have been trending towards using credit reports to screen out potential applicants who might be untrustworthy or unreliable based upon an unsatisfactory credit history.  According to an article written by New York law firms, Dechert LLP, and Associated Corporate Counsel because of this corporate trending towards using credit reports in hiring decisions, federal regulations are expanding in an attempt to avoid possible discrimination law suits.  In recent months, the The Equal Employment Opportunity Commission has likewise stepped up its enforcement
efforts in this area. For years, the EEOC, like many state fair employment practices agencies, has taken the position that the use of credit reports in employment decisions has a disparate
impact on certain minority groups. Recently, however, the EEOC has become much more
aggressive in trying to curb employers’ use of credit checks.

In an attempt to send a firm message to employers, the EEOC brought a class action suit in December 2010 against Kaplan Higher Education Corp. in the Northern District of Ohio, alleging that the company engaged in a pattern or practice of discrimination by refusing to hire applicants based on their credit histories. The EEOC contends that this practice has an unlawful disparate impact on African Americans. It's not just African-Americans who are feeling discriminated against by this relatively new trend, but all people who were adversely affected by the economic recession.  For Blacks, the situation is obviously much worse.  The unemployment rate for them is somewhere around 20% and that was before the recent economic recession.  A Vermont law going into effect on July 1, 2012 will severely limit the use of consumer reports by employers during the job application process. Joining California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington, Vermont is the eighth state to pass such a law, with Vermont's arguably being the most restrictive to date. For a full summary of the new Vermont law, click here - http://www.jdsupra.com/post/documentViewer.aspx?fid=4a2b9a29-984d-4000-883e-1f4427f51632

To date, 61 bills in 29 states and the District of Columbia were introduced or pending in the 2011 legislative session. The total number of states that limit employers' use of credit information in employment is now seven: California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington. Washington enacted legislation in 2007, Hawaii enacted legislation in 2009, Illinois and Oregon enacted legislation in 2010. California, Connecticut and Maryland enacted legislation in 2011. In my home state of Washington,


According to John Ulzheimer at http://www.credit.com/, Equifax has chosen to cease selling credit reports to employers for pre-employment screening. Apparently, the profit from selling this type of credit report was not worth the risk to Equifax. There has been a lot of reporting about the trap that potential employees find themselves that starts with them becoming unemployed, leading to them getting behind on their bills, which hurt their credit scores and then, when they finally get an interview, they don't get the job because their potential employer doesn't like the looks of their credit report, which leads to further unemployment and further damage to the credit report. 

Can accumulating enormous debt have an effect on your credit score?

Share |  Posted April 19, 2013 by guest writer Andy Raybuck at AscendantEquity.com

Can accumulating enormous debt have an effect on your credit score?
If you have incurred enormous debts, then you will have to take the necessary steps to pay them off. The company may write off your debt so that they can get tax benefit but, generally, your debt gets sold to a collection agency. The agency may either take legal action against you or sell it to the other collectors. This will ultimately fall off your credit report and leave a negative impact on your credit score for several years. If debts have become unmanageable for you, you may take the help of credit card consolidation and get rid of debt problems soon.

Old debts – What is their reporting time?
The old debts generally get charged off when you do not agree to pay them. As such, the banks usually write off credit card outstanding balance within 180 days of negligence. The bill then gets sold to the debt collectors and it appears on your Equifax, Experian and TransUnion credit reports for seven years. The collection agencies may add up their own entries that will stay on the credit report for the same period of time. With having old debts, your credit score will get lowered till they get removed automatically in seven years.
Debt – What effect does it have on your credit score?
There are several factors such as old and new debts that affect your credit score to a great extent. The old debt consists of collection agency accounts and charged off bills that are a part of your credit report. This includes 35 percent of your credit score. You counterbalance the effects of the old debt by maintaining revolving account balances low and paying off the present accounts within their due date. Lenders will show more interest in your present financial condition than your previous mistakes.
Debt Settlement Law – What do you need to know about it?
Debt settlement is an industry that has conventionally not been regulated. As a result, many consumers have taken undue advantage by deceitful individuals in this sector. It has been undecided as to what organization should be controlling the debt settlement industry. Attorney Generals of individual states have varied in their approaches to safeguard the people. This has created a puzzled network of rules and regulations that often leave the consumer susceptible to untrustworthy debt settlement companies.
The Federal Trade Commission (FTC) has formulated a set of new regulations that will enable the FTC to better administer the debt settlement industry in a more uniform manner. The new FTC rules require that you do not need to pay any fees till debt settlement services takes place. This provides assurance to the clients that they’ll receive the services they had enlisted for implementation.
Old accounts – What are its considerations?
The old accounts usually get removed through the dispute process by the Fair Credit Reporting Act if there appears any error in the credit report entries. You can obtain your free credit reports through AnnualCreditReport.com and find even a small incorrectness to dispute with Equifax, TransUnion and Experian. The credit bureaus are needed in order to attempt legalization with the lender. The lender may even be out of the business if the debt is old by many years. However, if they fail to validate, it means that the wrong entry will be removed from your credit report. This, in turn, will help you raise your credit score.
Old debt – How is statute of limitation different from one state to the other?
You need to know that old debt has a statute of limitation that varies from state to state. This is the reason as to why the collection agency or the creditor cannot file a suit against you when the statute has been passed. The NOLO legal website cautions that dishonest debt collectors purchase your old debts and, in turn, make false threats to get the payments. They may even tell you that they’ll put previous bill on your credit report and hurt your credit score. However, they do not have the legal right to do so. Tell the debt collectors that you are aware about the law very much and will dispute for change in the credit report and report them to your state attorney general in case they may follow through.
Thus, if you have accumulated huge debt, this will hurt your credit score. As such, you should try to pay off your debts on time. This will prevent you from dropping your credit score.