Thanks to an accountant who screwed up my taxes several years ago when I inherited some money from a relative, the IRS took a second look at my taxes for that year a couple years later and determined that I owed them about $5000 more than what I paid. It was not a large inheritance and I ended up using it to live off of when I lost my job, so by the time the IRS contacted me, I didn't have the money to pay them. They filed a lien in 2009. In 2011, I was able to pay it off completely and it showed up as a paid lien on my credit reports.
After doing some research on my own earlier a couple of months ago, I stumbled across an article about having federal liens withdrawn and removed from your credit reports. There is an IRS form to do this. The form number is 668 (Y) or 12277 - doing a web search will help you locate this form. The IRS will only withdraw liens by request - they do not do it automatically. Liens can remain on your credit reports for up to 10 years, even if they are paid. You can only request the withdraw if the lien is paid. From what I read, they will also consider a withdrawal if you have set up a payment plan with the IRS and have been paying on it (I don't know for sure if this works, because my was paid, so I can't confirm this situation).
Once the form is filed out, you will need to send it to the Advisory Group for your state. To find this adress, I did another web search and got a list of all the states and what address to mail the form to for each state. In my case, I live in SC and had to mail it to an address in NC.
The instruction part of the form says that they will send the same notification they will send to you to any address you provide to them with the form, including credit reporting agencies. If you do not give them this information, you can make copies of the withdrawal you receive and mail them yourself.
The IRS states that processing will take 45 days and that is about how long it took for mine. I received the withdrawal notice by mail and my federal lien was removed from all three credit reporting agencies about two weeks later.
Hope this information helps. I didn't want to post anything until I knew it worked - it definitely worked for me.
I'm crossing my fingers! I just submitted a request for withdrawal last week.
Did your credit score go up after it was withdrawn?
I received the Withdrall Notice from IRS, Do I still need to contact the Credit agency's with this letter? or does IRS contact them directly to delete my negative entry???
If you include in your paperwork you sent the IRS to contact the CRAs, they should do it. If you didn't, you need to send a copy of the withdrawal notice to each of them. I asked them to do it, but I also sent a copy of the notice myself to be double sure.