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Not Paying Your Taxes Can Hurt Your Credit Score

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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 15th date falls on a Sunday and Monday is Emancipation Day in the District of Columbia.

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 collected on your profile by the credit reporting agencies.

[Related Article: Stop Procrastinating: Last Minute Tax Tips]

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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.

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Last year, the IRS announced several new rules designed to help people who are having difficulties meeting their tax obligations—some of which will lessen the impact on 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 18th so you can avoid late penalties and help maintain your credit reputation.

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Image: tinou bao, via Flickr.com

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