Medical bills and student loans get a lot of media attention when it comes to the collective American debt. What people do not hear enough about are the Americans struggling to repay hefty tax debts to the IRS. Does this describe your situation?
When people have big tax debts, the assumption is that the individual attempted to dupe the IRS and got caught. This is certainly a possibility, but many people do not file their own tax returns. It is frightening what some professionals can do to skim money off the top at your expense.
Even when you do file your own taxes, you may make mistakes that cost thousands later on. In fact, the IRS itself can make a mistake, such as continuing to send out automated billings for a settled bill.
How does it impact your credit?
Even when the bill is legitimate, unpaid taxes may not end up affecting your credit score at all. Credit Karma reports that this was not the case until 2018 when the three credit bureaus stopped including tax liens on credit reports. Even though they might not directly affect your credit score, there are other problems it can create.
What are some other negative effects?
The biggest problem is that the longer the bills go unpaid, the more you owe. This is because the IRS may continue to add penalties and interest. If you send in the original quoted payment late, chances are, you still owe the IRS penalties and fees.
Falling behind on your tax bill may also affect your ability to keep up with the rest of your bills, such as utilities, rent or credit card bills.
The good news is that there are many possible solutions to look into. Many people are able to successfully get on a payment plan to make payments they can afford and clear the debt in a reasonable amount of time.