Conclusion While paying taxes has no direct relationship to your credit score, using the credit to cover your tax payment can indirectly affect your credit, and not paying your taxes not only gets you into trouble with the IRS, but also jeopardizes your ability to obtain credit. Because the IRS is an agency of the federal government, there are procedures that protect your credit score from being tarnished just by owing taxes. For example, if you prepare your tax return and you still owe additional taxes with it, this alone won't affect your credit score. Only when you don't pay what you owe in a timely manner can your credit score be affected.
Finding out that you owe a debt to the Internal Revenue Service (IRS) can be stressful and overwhelming, especially if you can't pay your taxes in full. You may be wondering how this will affect your credit score. Fortunately, tax debt and your credit rating aren't directly related. However, this doesn't mean that your credit rating is immune to other consequences related to your outstanding tax debt.
Like any other type of debt, owing the IRS is always a possibility. The good news is that taxes don't directly affect your credit score. However, not paying them definitely does. And, since the IRS is a government agency, it has the ability to tax your property or even garnish your salary, making it difficult to pay other debts you may have accumulated.
Instead of following this dangerous path, pay off your tax debt as soon as you can. However, you should keep in mind that just because there are no tax levies in your reports doesn't mean they can't cause you problems when applying for a loan or other type of funding. The amount of taxes you owe is an important factor in determining if your credit score will be affected.
Tax reliefcan allow you to divide your debt into payments or reduce the amount of taxes you pay to the government.
Tax relief companies regularly use the Internet, radio and television to advertise their services to struggling taxpayers. But even if you are, the agency can still obtain a lien if it decides that it is necessary to guarantee the refund of your entire tax bill. This is because your credit is only affected once the IRS files a Notice of Federal Tax Lien with the court. In addition to making it difficult to obtain new credit cards or loans, homeowners or employers can also see the tax lien, which can have its own negative effects.
If you're faced with a tax bill that you can't pay, carefully consider all your options and their consequences before making a decision. No, the tax relief won't kill your tax bill and may cost you more in the long run, but it could make paying what you owe the federal government much more manageable. The tax resolution companies referred to here are not law firms, nor do they make such returns.
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Tax relief really means establishing a payment plan or negotiating an agreement with the IRS; it's not about erasing your tax liability. When it comes to strategies for managing taxes that you can't pay in full when they're due, you have several options.