As Benjamin Franklin said there are two certainties in life: Death and taxes. But despite being completely familiar to us all, it’s remarkably easy to run afoul of the tax code, end up under the prying eye of the Internal Revenue Service, and struggling with ramifications to our credit reports.
Luckily for most Americans, the IRS does not report delinquencies, payment plans used in non-payment cases, or individuals who use the Offer in Compromise route to settle tax problems. So the good news is: If you work with the IRS, you’ll likely escape with your credit report and credit score intact.
But if you prefer to turn a blind eye to your back tax issues the IRS can take out a lien, which will have a negative impact on your credit score and report.
Now, the IRS is working to give people who are the subject of liens a lifeline in the current economic climate. The agency has announced updates to its Fresh Start Program, which will ease the financial impacts of owning back taxes. Previously, the stain of a tax lien remained on a person’s credit report for seven years—even after the debt had been satisfied. Now, the IRS will move to reverse the lien if the taxpayer either pays the debt in full or enters into a payment plan. Crucially, consumers will need to proactively contact the IRS to enroll in the Fresh Start Program.
It’s always advisable to seek out the advice of a tax professional before contacting the IRS. Taxpayers who are in arrears should understand their rights and responsibilities when it comes to dealing with the IRS. But by investing in a consultation with a professional tax attorney or CPA who specializes in tax issues, you’ll be fully aware of your options to work with the IRS and get back on track.
– Lindsey Gay, CreditScore.net