How Does Sustained Debt to the IRS Affect Your Credit Score?

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IRS tax debt can impact nearly every facet of your daily life. Beyond the financial burden and the general stress of constantly dealing with the IRS, you may eventually wind up with a less than desirable credit score, which, in turn, could leave you struggling to obtain new lines of credit. Before you get too worried, however, you’ll want to keep the following in mind:

Unpaid Tax Debt Doesn’t Necessarily Harm Your Credit Score

Your credit won’t automatically be dinged the moment you discover that you’re unable to cover your tax burden on time. The debt itself won’t necessarily impact your credit score; rather, you’ll start to suffer if you fail to make arrangements to pay off your debt in a timely manner. Even then, you might be able to get away with sustained debt if your account is deemed currently not collectible. In general, it’s in your best interest to make arrangements with the IRS sooner than later.

The Implications For Your Credit Score Depend on How Much You Owe

If you owe the IRS a relatively small amount and make a faithful effort to pay that tax off, you have no reason to worry. Typically, credit scores only come into play when the IRS files a Notice of Federal Tax Lien — an option typically reserved for taxpayers who owe above a high threshold. Prior to filing this notice, however, the IRS will provide plenty of opportunities to develop a plan for paying off your debt. In most cases, liens constitute a last resort.

There’s no need to let IRS debt destroy your credit score. The experts at the Highland Tax Group can help you develop a strategic plan to ensure that your debt is dealt with promptly, thereby minimizing the impact on your credit. Reach out today to learn more.