Will my back taxes affect my credit score?

If you owe the IRS back taxes, the IRS has the right to take various actions that will have a negative effect on your credit score.   As such, it is important to understand the connection between back taxes and your credit score:

• Initially the IRS may try to work with you, but if you do not or cannot make a payment arrangement of some form on your back taxes, the IRS will issue a tax lien against you.  Such a lien essentially states that the IRS has the right and the intention of seizing your property, assets, valuables, and even your income to pay what you owe them in taxes.

• A tax lien has seriously negative ramifications on your credit score, and will make future lenders and creditors leery when it comes to lending to you.  Such a lien can also mean that you are issued higher interest rates on future loans, which will cost you much more over time.

• If after a lien is issued your tax woes are not resolved, the IRS can move to levy, or forcibly seize, your property and even garnish your wages.  This can have even further negative effects on your credit score.  A tax levy can mean that you will no longer have the assets or money you need to keep accounts current, which can have a downward spiraling effect on your credit.

If you have back taxes that you are concerned about, it is important to contact a lawyer as soon as possible. Your attorney can help you to identify a way to deal with your back taxes with as little expense and damage to your credit as possible.