The IRS can take away your salary, put a lien on your property and ruin your credit if you do not pay taxes. On the flip-side, while paying taxes shows fiduciary responsibility, the IRS has no affiliation with the credit bureaus so paying on time won't win you any points. Actually, it is the credit bureaus that will try to find out about disputes with the IRS.
Identification
The IRS does not actively report delinquent or successful payment to the credit bureaus, according to the IRS website. Credit bureaus, however, actively search for public judgments against consumers, which includes IRS tax levies and liens. Thus, the IRS does not need to report to any credit rating agency, because the agencies do that for the IRS.
Effects
If a credit agency finds out about an IRS tax lien, it will stay on the consumer's report for seven years after satisfactory payment or 10 years if left unpaid and cause havoc on a credit score. An IRS lien could cause someone to become too risky for a commercial loan and even unemployable to employer who runs credit checks on applicants.
Tax Lien Verification
The only time the IRS communicates directly with a credit agency is when a consumer disputes a tax lien. If the IRS verifies the lien, the credit bureau notifies the consumer within five days of verification. Carreon and Associates suggests paying off the tax lien if possible and then waiting six months to dispute the lien with the credit agencies. Once a taxpayer resolves his tax bill, the IRS may not even waste its resources to bother responding to any requests to verify the lien.
Tip
When the IRS tries to collect on a tax bill and it looks like the payer can never afford the full amount, the IRS may accept a lower settlement called an "Offer in Compromise." In an OIC agreement, it is possible to ask that the IRS claim the lien was "erroneous" as part of the settlement. The IRS, however, rarely accepts compromise offers and it is less likely that they agree to remove any record of the lien.
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