Accruing tax debt can lead to serious consequences, yet Americans still owe the government an estimated $373 billion in unpaid federal taxes.
In the worst case scenario, failure to pay your taxes can land you in jail, but a group of lawmakers is suggesting that Uncle Sam should also make an appearance on your credit report.
Senate Finance Committee Chairman Max Baucus, D-Mont., Sen. Orrin Hatch, R-Utah, and Sen. Charles Grassley, R-Iowa are looking to a recent report from the Government Accountability Office as they consider allowing the IRS to report tax debt to credit reporting agencies.
As it stands, laws protecting the privacy of tax return data prevent tax debt from creating a black mark on your credit report, with the exception of tax liens. Lawmakers hope that allowing the IRS to directly report tax delinquency would encourage more debtors to pay.
“Millions of individual and business taxpayers owe billions of dollars in unpaid federal tax debts, and the IRS expends substantial resources trying to collect these debts,” the GAO report states.” “Taxpayers would be forced to either dispute the inaccurate information to have it corrected or face possible serious consequences such as denial of credit, employment, or housing due to the inaccurate negative information on their credit histories.”
On the other hand, the accuracy of tax debt reporting comes into question.
“Taxpayers would be forced to either dispute the inaccurate information to have it corrected or face possible serious consequences such as denial of credit, employment, or housing due to the inaccurate negative information on their credit histories,” the GAO report said.
A number of details will need to be explored before the senators explore the issue any further including whether all tax debts would be reported or just the debts that exceed a certain amount.