Don't pay taxes, credit takes a hit
You already know it's not a good idea to stiff Uncle Sam. How much impact can it have on your credit score?
This post comes from Tom Quinn at partner site Credit.com.
This year, Uncle Sam is giving U.S. taxpayers some extra time before the filing deadline. The 2012 deadline falls on Tuesday, April 17, as the normal April 15 date fell on a Sunday and Monday is the District of Columbia’s Emancipation Day.
But while you may get an extra two days to file, don’t expect any reduction in the enforcement of the rules and procedures for those people who decide they don’t want to pay their taxes.
Many consumers are unaware that not paying your taxes can result in a tax lien being reported on your profile, thanks to the credit-reporting agencies.
A tax lien is typically considered a negative item in a credit score and remains on your credit report seven years from the date the tax liability is resolved -- or longer, if it’s not resolved. The specific point impact a tax lien has on a credit score will depend on the tax lien information reported, as well as the other information contained in the credit report.
However, the impact is greatest when the tax lien is recent and where the consumer has no other negative items (missed payment, high credit card balances, etc.) being reported. In these cases, the tax lien can drop the score by 100 points or more.
Last year, the Internal Revenue Service announced several new rules designed to help people who are having difficulties meeting their tax obligations -- some of which will lessen the impact on a score. Click here for information on these changes.
So, my fellow procrastinators, do take advantage of these extra two days. And do make sure you file before April 18 so you can avoid late penalties and help maintain your credit reputation.
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