Not Paying Taxes Could Hurt Your Credit
This year, Uncle Sam gave U.S. taxpayers some extra time before the filing deadline. The filing deadline falls on Monday, April 18, as the normal April 15th date falls on the date that Washington, DC observes Emancipation Day.
While you may have gotten an extra three days to file, don’t expect any reduction in the enforcement of the rules and procedures for those people who decide they don’t want to pay their taxes. Many consumers are unaware that not paying your taxes can result in a tax lien being collected on your profile by the credit reporting agencies.
A tax lien is typically considered a negative item in a credit score and remains on your credit report seven years from the date the tax liability is resolved -- or longer, if it’s not resolved. The specific point impact a tax lien has on a credit score will depend on the tax lien information reported, as well as the other information contained in the credit report. However, the impact is greatest when the tax lien is recent and where the consumer has no other negative items (missed payment, high credit card balances, etc.) being reported. In these cases, the tax lien can drop the score by 100 points or more.
Last year, the IRS announced several new rules designed to help people who are having difficulties meeting their tax obligations -- some of which will lessen the impact on score. Click here for information on these changes.
So, my fellow procrastinators, make sure you file before April 18th so you can avoid late penalties and help maintain your credit reputation.
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Tom Quinn Credit.com’s Consumer Credit Expert, Tom shares invaluable insight to navigating the often complicated world of credit scoring, credit reporting and credit granting industry practices. Formerly with FICO (Fair Isaac), MDS (now Experian) and Citibank, Tom has more than 20 years of experience in the credit industry and is currently Vice President of Scoring at Nomis Solutions. Reach Tom at firstname.lastname@example.org.
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