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Congress considers credit bureau alerts for unpaid taxes

| Oct 25, 2012 | Uncategorized |

In previous posts we have mentioned that the Internal Revenue Service is attempting to crack down on those with unpaid taxes. Whether it is someone who made an honest mistake or it is well-planned tax evasion, the IRS is going after unpaid income taxes.

The IRS seems to be using a carrot and stick approach. The carrot is offered via amnesty programs for late filers or those with undeclared income from offshore accounts. Now Congress is considering a new stick that may urge some people to pay their IRS back taxes — reporting unpaid income taxes to the credit bureaus.

Credit card companies, mortgage companies and others report unpaid or overdue debts to the credit bureaus but as of yet, the IRS has not done so. The Government Accountability Office prepared a report for Congress that lays out the advantages and disadvantages of reporting tax debt to the bureaus.

The reason behind this consideration is the massive cumulative amount that is owed by taxpayers. It is estimated that $372 billion is owed, with some individual taxpayers owing as much as $100 million.

If the IRS were to begin reporting to the credit bureaus, so goes the reasoning, more individuals and small businesses will come into compliance. A negative remark would certainly impact one’s credit rating, and in turn one’s ability to obtain credit for major purchases.

At this point in time, it is only a GAO proposal for Congress to consider. Until then, anyone who receives a letter from the IRS regarding any unpaid taxes would be wise to consult with a seasoned tax and legal professional.

Source: The Baltimore Sun, “Should the IRS report unpaid income taxes to credit bureaus?” Eileen Ambrose, Oct. 15, 2012

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