H&R Block of North Platte and Ogallala Tax Tip (Week of Feb. 28)

Do IRS Payment Plans Affect Your Credit?

 

Dealing with an IRS tax bill can be a stressful and daunting experience. If you are unable to pay the full amount upfront, setting up a payment plan with the IRS can be an effective solution. However, many taxpayers are concerned about the impact that payment plans may have on their credit score. The good news is that setting up a payment plan with the IRS does not directly affect your credit score.

 

The IRS is prohibited from sharing any personally identifiable information about taxpayers, including information about their payment plans, with credit bureaus. This means that the establishment of a payment plan with the IRS will not trigger any reports to the credit bureaus that could potentially lower your credit score.

 

It is important to note that while the establishment of a payment plan itself does not directly impact your credit score, a Notice of Federal Tax Lien may appear on your credit report. This is a public record that indicates the IRS has a legal claim against your property due to unpaid taxes. A lien may affect your ability to obtain credit, as lenders may be less willing to approve a loan or extend credit to someone with a tax lien on their record.

 

If you are unable to pay your tax bill in full, it is essential to consider setting up a payment plan with the IRS to avoid more serious consequences, such as wage garnishments or levies on your bank account. The IRS offers several payment plan options, including short-term plans and long-term plans, to help taxpayers manage their tax debt. By setting up a payment plan and making regular payments, you can satisfy your tax debt and avoid any negative effects on your credit score.

 

In conclusion, if you are struggling to pay your tax bill, setting up a payment plan with the IRS is a viable solution. While a Notice of Federal Tax Lien may appear on your credit report, the establishment of a payment plan itself will not directly impact your credit score. It is important to explore all available IRS payment options and work with a tax professional to ensure that you are meeting all tax obligations and avoiding any potential negative consequences.