Taxes and Credit Reports

[Anonymous]

I'm curious about tax issues and their possible impact on credit reports.

If someone were to do an offer-in-compromise with the IRS, how would that show up on their credit report? What would it say and would it mean heavy ding to score?

I have the same questions in regards to IRS installment agreements.

Also, are those the only 2 types of agreements you can do with the IRS? Thanks

[Anonymous]

If you are talking about a Tax Lien, you do not want that.  It is one of the worst major derogatories.  Even if you settle for less, the lien will be just as bad.

If you make arrangements to pay they may not report.  You would need to ask them before hand.

[MarineVietVet]

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@Anonymous wrote:

I'm curious about tax issues and their possible impact on credit reports.

If someone were to do an offer-in-compromise with the IRS, how would that show up on their credit report? What would it say and would it mean heavy ding to score?

I have the same questions in regards to IRS installment agreements.

Also, are those the only 2 types of agreements you can do with the IRS? Thanks

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I can only answer for myself concerning one of your questions. I've had payment arrangements with the IRS with no entry on my credit file and no effect on my credit.

From a BK years ago to:

9/09 EX pulled by lender 802
3/10 EQ- 800
4/10 TU -772

You can do the same thing with hard work

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[Anonymous]

Methinks you'd be better to pull money outta yer 401K or IRA, cash advance from your CCs, borrow from family, or just about else legal and this side of a mafia loan shark to get the IRS paid.

[Anonymous]

Their installment agreements keep you in their good graces.

Ignoring them, or neglecting to make payment arrangements with them will bite you hard.

[MarineVietVet]

I know there are many horror stories out there about dealing with the IRS but for me it was a much more positive experience than I've had working with other government agencies and/or creditors. 

From a BK years ago to:

9/09 EX pulled by lender 802
3/10 EQ- 800
4/10 TU -772

You can do the same thing with hard work

Credit Scoring 101
Common Abbreviations
Frequently Requested Threads
Credit Problems Which Is Worse?
Whats In Your FICO Score

[Anonymous]

Speaking from experience, do any (legal) thing necessary to keep the IRS from filing a tax lien against you.  After the lien, they may follow up with garnishing your wages.  So what you think you can't afford to pay them now, will end up being forced upon you.

I believe if you keep them from filing the lien, you are unlikely to see an impact on your credit score.

If you find someone reasonable at the IRS, do whatever you can to keep working with that individual.  I found a great variability in the knowledge, attitude, and helpfulness of various representatives.

It's my belief that the offer-in-compromise is rarer than many sources would have you believe.  I could be completely wrong here, but it seems as if they'll only go for the OIC if they can't get the full balance out of you.  Unlike your run-of-the-mill CA, who is just trying to maximize the ROI on one bad debt at a time, I think the IRS by policy does not want to make OIC a viable alternative in most situations.  In any case, I do not believe the OIC will affect your credit score.

The installment plan will not affect your credit score, either, AFAIK.  IMHO, that is the way to go.  Treat it like any other debt.  Make a deal, pay on time, never ever be late, save some cushion so you can keep paying the installment if you have other issues.

I am not a tax professional, or a lawyer.  You may want to consult a tax professional.  Maybe you already have.  My advice would be to start with a CPA.  You may be able to get a 15 minute consultation for free that will help a lot.  You may get pointed toward someone who can help you without stealing what little the IRS has left in your wallet.

[daisyduke]

You can do an installment if you have to. I think the IRS charges around $50 for a set up fee and the minimum payment they will accept (I was told this) is $100. Installment paperwork takes like two months to draw down from your bank account, so you still have to send in a check for the first two months.

Now, I have to tell you from experience, I had owed $5K for taxes....I claimed my child this year to get money back. I owed only $1500 from this tax bill - Tax refund was suppose to be in the tune of $3K. Guess what my friends at the IRS did? They gave me back $56!!! They charged me an additional penalty of around $1500 total in addition to the $1500 balance left. So I guess my point is better to pay them now, before they start to assess penalities and other miscellaneous fees.  I got the transcripts of my account and I paid the IRS well over $9K for a $5K tax bill - no joke. Why? i guess they can charge penalities for just about anything at anytime. I'm going to have a tax attorney take a look at this, it jsut doesn't seem right to me. NO effect on my credit report, no liens or anything like that. The installment history to the IRS did not report.   With all that said, please understand I think the interest rate is around 28%. They take cc's as well.

I'd be very curious to know about wheeling and dealing with the IRS and the overall effect on credit report.  I wish I would have checked that out...

Good luck.

[laz98]

you can definitely get on a payment plan with the IRS for taxes you owe.  it's very easy.  people do it all the time.  hell, my in-laws have 2 payments plans with them right now!  we will be on one shortly ourselves.

[Anonymous]

From what I understand tax levies don't affect your credit report or score, but tax liens do.  Is that correct?  Now if the IRS were to take collection actions, which do they generally do first, a lien or a levy?