Benjamin Franklin famously stated: “In this world nothing can be said to be certain, except death and taxes.” Another certainty is that tax returns are due on April 15, or on the next business day if April 15 happens to fall on a weekend or holiday. While we all strive to pay our taxes on time, or at least obtain appropriate extensions from the IRS and/or state taxing authorities, circumstances may arise where we are unable to file our taxes in a timely way. The question arises as to whether not filing your taxes affects your credit score.
The answer depends on whether or not you owe money to the government. Merely filing your tax returns late, or even owing back taxes to the IRS for that matter, will not typically affect your credit score. It is only if you are so delinquent in paying your back taxes that you receive a tax lien that your credit score will be affected.
The IRS does not typically notify Experian, Equifax or TransUnion — the three credit reporting agencies that calculate your credit score — if you are delinquent in paying back taxes, owe fines, or have entered into a payment plan for money owed to the government. But if you neglect your payment obligations so that the IRS imposes a lien on your assets, the filing of the lien will show up on your credit report and will lower your credit score.
The IRS has indicated that in light of the economic hardship and job loss that has faced many Americans over the last several years, they have increased the dollar amount for back taxes owed to the government that will result in a tax lien. Nevertheless, if you are experiencing hardship in making your tax payments, it is important to contact the taxing authorities and work out a payment plan. The IRS will work with you on coming up with a program that makes senses based on your personal financial circumstances. Failing to take appropriate action to address your tax obligations will likely result in a lien being placed on your property, which will lower your credit scores.
Taxpayers who expect to receive a refund from the government tend to file their tax returns early, while those owing money to the government tend to file their taxes at the last minute. Filing taxes at the deadline, or even late, will not impact your credit score. But receiving a tax lien for failure to pay back taxes will result in a lower credit score.
For more personal finance advice including helpful tips on how to improve your credit score, go to CreditScoreFree.net.
Copyright © 2017 www.creditscorefree.net. All Rights Reserved.