Protect credit while paying off IRS tax debt
Owing the IRS money on income taxes is never pleasant, but being unable to pay the debt can be frightening for many individuals. Many taxpayers may be afraid that failure to pay with immediately result in tax liens, levies, wage garnishment and credit damage. However, the truth is, the IRS offers several payments options, and changes to one of its new programs may help individuals protect their credit standing while they pay their balance.
The Fresh Start program is designed to provide some relief to consumers who cannot pay their tax bills in full. In addition, the federal tax agency has put measures in place that will also help consumers protect their credit scores, which can be a huge asset in their ability to buy a home, gain employment and qualify for lines of credit.
For example, the program allows eligible taxpayers to petition for liens to be removed from their credit reports after they have paid their tax bill in full. A tax lien is the federal government's legal claim against a taxpayer's property, and is often placed on their account when the individual neglects or refuses to pay their tax bill. Liens may be placed on personal property, real estate, financial accounts and business assets.
Under previous rules, tax liens would remain on individuals' credit reports for up to seven years, even after they paid their balance to the IRS. Similar to other types of adverse actions that appear on a consumer's credit file, liens can knock as much as 100-plus points off an individual's credit score, pushing them from prime to subprime quickly. Under new rules, those who have paid off their balance can request to have it removed before the seven-year period is up.
In addition, the program allows those who enroll in direct debit installment programs to also petition to have the lien removed. In order to qualify, individuals must make three consecutive payments. In addition, they must have filed income tax returns for the last three years and not defaulted on previous IRS installment agreements. Lastly, the balance owed must be less than $25,000, including penalties, fees and interest.
Individuals who find they owe taxes that they are not able to pay should first speak with their tax preparer to better understand all of their payment options. The IRS offers installment programs that allow Americans to make monthly payments toward their balance until it is paid off. This may help individuals avoid liens and other adverse actions altogether.
Liberty Tax Service provides computerized income tax preparation and electronic filing. Each tax office offers customers audit assistance, a money back guarantee, and free tax return checking.
About Liberty Tax Service
Liberty Tax Service is the fastest -growing retail tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 8,000,000 individual income tax returns. With 42 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service.
Liberty Tax Service is the only tax franchise on the Forbes “Top 20 Franchises to Start,” and ranks #1 of the tax franchises on the Entrepreneur “Franchise 500.” Each office provides computerized income tax preparation, electronic filing, and online filing through eSmart Tax.