Nevada tax debt: Tax debts reported to credit bureaus?
An interesting question is being posed that has the possibility to affect Nevada taxpayers. The Government Accountability Office (GAO) was asked to check into whether the IRS should be allowed to report a consumer’s tax debt to credit reporting bureaus. At the present time, they are prohibited from doing so by federal law.
The only time that someone’s tax debt may show on a credit report is if the IRS files a tax lien. However, two U.S. senators seeking to uncover billions of dollars in unpaid taxes are beginning to examine what could happen if the IRS were allowed to report all of those debts. The findings of the GAO were startling.
The report found that in the year 2011, about $373 billion dollars were owed in unpaid federal taxes. The majority of the money owed was from individuals, but $115 billion of the debt belonged to businesses. Over half of the tax debt owed to the government ended up being less than $5,000; however, debts totaling over $25,000 actually made up the majority of the $373 billion debt.
While this represents a significant amount of money, experts warn that requiring the IRS to release tax information to credit reporting agencies could do more harm than good. Some believe that inaccurate data reported by the IRS could be harmful to consumers attempting to buy on credit. In addition, they fear that the added penalty for tax debt may induce more people to lie on their tax forms. Experts advising the GAO recommended that other measures should be examined before choosing to allow the IRS to report the information.
For now, Nevada consumers can breathe a little easier. However, the subject doesn’t appear to be completely over yet. Tax debt can be overwhelming for consumers, but worrying about being denied credit or a home purchase due to inaccurate information could result in a host of other problems for both consumers and the government. Those who are especially worried may wish to seek advice from someone who has experience working with tax debt issues.
Source: About.com, “Should IRS Report Tax Debts to Credit Bureaus?” Robert Longley, Oct. 16, 2012