Many Americans struggle financially, whether through issues with their job, unexpected bills, or obligations to the IRS. In fact, paying back taxes is an unfortunate debt that affects people across the income stratus. If you owe money to the IRS, it can seem overwhelming, and you may be left wondering if a payment plan to the IRS will affect your credit.
How does an Installment Agreement with the IRS work?
If you owe more in taxes than you have the means to pay upfront, or if you haven’t paid an outstanding tax bill to the IRS, then you may be eligible for an IRS payment plan.
Even if you don’t think you can pay your tax bill by the due date, you should still file your tax return on time. Then, you can request a payment plan, which will help you avoid late fees, interest and other potential penalties.
Will an IRS Payment Plan affect my credit?
An installment agreement to pay your back taxes will not negatively affect your credit. However, failing to pay your taxes or filing a late tax return can easily turn a good credit score into a bad one because, the IRS can place a tax lien against you. A lien can affect your ability to purchase a car or a home and will negatively impact your credit score.
While a payment plan with the IRS – in and of itself – will not negatively impact your credit, not paying what you owe the government will if/when a lien is filed, so it’s best that you act and take steps to solve your tax issue.
When can paying back taxes help my credit?
Unlike most kinds of debt, paying the IRS on time or even making the installment payments on time don’t positively affect your credit.
At Wiztax, we can help you get on an IRS Installment Agreement. In addition, the Wiztax system can determine if you’re eligible for an Offer in Compromise, which is an agreement to settle your tax debt for less than the amount owed. For those in especially difficult financial straits, we may also be able to guide you to a Hardship Status filing, which demonstrates that the tax you owe would place a crippling financial burden on you. Regardless of which option is best for you, we can help with it all and you can start for free right now.
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