The Peck Group, LC - Tax Law
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Comprehensive Tax Law Representation Since 1995
We handle every aspect of tax law: preparing tax returns, representing clients during audits, resolving IRS and state tax controversies, and creating tax planning strategies for the future.

Does owing back taxes affect my credit?

| Jul 27, 2018 | IRS Debt Resolution |

Last year, you made a major career change. You moved from your safe, corporate job and branched out on your own. Things have gone well. Your earnings have been high, and you’re considerably happier in your new position.

However, when you prepared your tax return and—for the first time in your life—filed as self-employed, you received an unpleasant surprise. You owe considerably more than you ever did as an employee. In fact, it’s more than you can afford to pay. What repercussions can your tax debt have on other aspects of your life—in particular, your credit?

The answer depends, in large part, on how you respond to your situation. If you hold off on taking action—ignoring your debt in the hopes that it will go away—it will likely hurt your credit score. In this case, the IRS will probably issue a tax levy or lien against you. If this happens, the government makes a legal claim on everything you own—your house, your car and any other assets. A levy or lien will negatively impact your credit.

If, however, you approach the problem head-on, the IRS will be more inclined to work with you to find a solution. You can set up an installment agreement, which enables you to pay off your tax debt in monthly installments over a period of years. If you set up such an agreement early on—i.e., before the IRS starts sending you debt notices and requests for payment—then the IRS will have greater confidence in your likelihood to pay off your debt completely. In this case, they will be unlikely to file a levy or lien against you—and your credit score will be unaffected.

If you’re facing tax debt, you may have questions or concerns. It’s always a good idea to consult with an attorney specialized in resolving tax debt about your situation.

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