Have you ever wondered if and how unpaid taxes could affect your credit? First of all, every consumer is allowed to pull a free credit report from each repository (Equifax, TransUnion and Experian) once per year at zero cost. If you would like to retain your credit score from theses entities, there could be a nominal cost. However, you can visit www.creditkarma.com to receive free credit scores at any time. You will receive free updates which allows you to monitor your scores without decreasing your scores. If you are concerned that your credit may have already taken a hit due to unpaid taxes; pull your credit reports today to put your mind at ease.
Will Unpaid Taxes Affect My Credit Report?
According to MSN Money, (Lazarony 2014), not paying your taxes can seriously hurt your credit reports. But there is a way to fix that if you qualify. While the fact that you owe the IRS money isn’t automatically reported to credit reporting agencies, if you owe $10,000 or more the IRS will automatically file a Notice of Federal Tax Lien, which will appear on your credit reports as a seriously negative item. (It is in the same category as a repossession or court judgments.) State and/or local taxing authorities may also file tax liens.
Once the IRS files a Notice of a Federal Tax Lien against you, it may limit your ability to get credit. And even if you file for bankruptcy, your tax debt and lien may continue. (Though some tax debts can be discharged – essentially “erased” – in bankruptcy).
One of the best remedies for avoiding the serious aforementioned ramifications of unpaid taxes from happening to you is to communicate with the experts. Namely your tax preparer, enrolled agent or tax attorney. If these choices are unavailable, make payment arrangements with the IRS before the amount reaches a ceiling where a lien becomes unavoidable. Remember, communication is key. Make sure that your payment arrangements are realistic and kept as promised. Avoid the wrath of uncle Sam at all costs.
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