NORWALK, Conn.--(BUSINESS WIRE)--Back taxes can affect a person’s credit standing and credit scores, but only if the IRS places a lien against a delinquent taxpayer’s personal property. Yet, nearly one-third of all consumers (31.96%) mistakenly think that the timeliness of income tax payments is what matters to their credit reports and scores, according to a FreeScore.com survey of 316 respondents conducted in March.
The survey results come as a majority of Americans are finishing their tax returns. While many taxpayers expecting to receive a refund tend to file their taxes early (in order to receive their refund payment faster), most of those expecting to pay additional taxes wait until the deadline. The deadline for 2011 tax filing is April 17th, as April 15th - the usual deadline date - falls on a Saturday.
According to an IRS spokesman, the agency is extremely protective of a taxpayer’s personal information. As such, the IRS doesn’t typically report to the credit agencies (TransUnion, Experian, Equifax) delinquencies, late payments, and payment plans placed on the taxpayer for non-payment. However, tax liens will ultimately show up in records that the credit bureaus use to assemble credit reports and scores. So if back taxes become delinquent to the point where the IRS places a lien, this can show up on a credit report and negatively impact a person’s credit score. But technically, it’s the lien, rather than the back taxes, that is the culprit.
The IRS has recently taken steps to reduce the number of liens it places on taxpayers. Citing current economic conditions, including high unemployment, the IRS says it has significantly increased the dollar amount threshold for allowable back taxes needed to trigger a lien action.
According to Carrie Coghill, director of consumer education for FreeScore.com, “Even if the IRS is more lenient about liens, taxpayers must be vigilant about paying taxes on time. If you cannot pay on time, contact the IRS to work out a payment plan. The last thing you want is a lien against personal property for back taxes that can ultimately show up on your credit report across the bureaus and adversely impact your credit scores,” she said.
From the survey:
Q: Do you think tax information – amount of taxes paid, timeliness of tax return, and other tax payment information – appears on a person’s credit report and impacts credit scores?
| Yes | 31.96% | |||||
| No | 37.97% | |||||
| Don’t Know | 30.06% | |||||
The survey data were collected from Survey Sampling International, using an opt-in panel of 316 respondents.
If you need a payment plan to help avoid a potential lien or other payment issues, you can contact the IRS at this web site: http://www.irs.gov/individuals/article/0,,id=243335,00.html.
About FreeScore.com
FreeScore.com, the value leader in online consumer credit services, provides members with affordable, unlimited access to all three credit scores from each of the national credit bureaus: TransUnion, Experian and Equifax. Over one million consumers trust FreeScore.com for their three bureau credit scores and information. For more information, go to FreeScore.com. FreeScore.com is a service of FYI Direct, Inc.